Overview

India’s current review of Virtual Digital Assets (VDAs) could lead to stronger protections for investors by establishing a regulatory framework that aligns more closely with global standards. Despite having over 100 million crypto users, India’s laws concerning VDAs remain insufficient. Existing regulations mainly focus on taxation and anti-money laundering (AML) measures without comprehensive consumer protection or regulations governing market conduct.

Key Points

• Current Status: India’s regulations currently cover taxation and basic AML obligations but lack consumer protection.
• Review Process: The VDA review seeks to address investor protection issues, including unclear exchange rules and insufficient disclosure standards, while discussing the implementation of risk-based regulatory frameworks and oversight for exchanges and custodians.
• Market Integrity Concerns: The review highlights challenges such as market manipulations, investor protections, and the smooth operation of decentralized finance platforms that are not well-regulated under existing laws.

Potential Regulations

The review is exploring various regulatory frameworks that can include:

• Risk-based classification of digital assets.
• Licensing for service providers to ensure compliance with governance and cybersecurity standards.
• Improved disclosure norms and strict regulations regarding the handling of user funds.

This comprehensive approach not only aims to safeguard investors but also fosters a more innovative cryptocurrency landscape in India.