SEBI’s Concerns Around Cryptocurrency

By Educrat IAS Academy | | 0 comment | 25 June, 2022 | 0

Recently, the Securities and Exchange Board of India (SEBI) has given recommendations on cryptocurrencies regulations in India.

Concerns raised by SEBI:

Consumer protection and enforcement of any regulatory regime over crypto assets would be challenging due to the decentralised nature of digital instruments.
There is a great likelihood of execution of unauthorised trades not in consonance with any regulatory framework.
Clarity needs to be brought on whether cryptocurrencies can be legally defined as securities.

Crypto assets related to unregulated activities may be entrusted to an investigating authority appointed by the government and take further legal action.
If crypto assets are not banned, then there is a need for feature-based characterisation of the tokenised version of the assets, which may attract the supervision of different sectoral regulators
The legislative framework, if proposed, would need to delineate the role for different regulators and authorities including for regulation purposes, it recommended.
Different regulators currently regulate various entities based on the services and products they offer.
There could also be a crypto asset referencing goods or services offered by entities, which are not regulated by any sectoral regulator.
Consumers availing of such products should be protected through the Consumer Protection Act.
It also suggested possible regulation of crypto trading platforms by the RBI under the Foreign Exchange Management Act (FEMA) as crypto assets are available for trading in a foreign jurisdiction as well and consumers abroad can remit funds to India using such currency.

Security Risks: Cyberattacks on wallets, exchange mechanism (Cryptojacking).
They are prone to issues like Hijacking, Routing Attacks, Distributed Denial of Service (DDoS) attacks.
Shield to Crime: Used for illicit trading, criminal activities and organised crimes.
Lack of Liquidity and Lower Acceptability: Outside the traditional banking systems.
Price Volatility: Prone to price fluctuations and waste of computing power.
Threat to the Indian rupee: If a large number of investors invest in digital coins rather than rupee-based savings like provident funds, the demand of the latter will fall.

Cryptocurrency is, despite all its risks, perhaps the most exciting asset of the 21st century. A decentralized digital currency that works on the very interesting and likely here-to-stay blockchain technology.
Establishing safeguards, measures and regulations after taking inspirations from developed countries would be the better way ahead.