During the latest G20 summit, India played a major role in pushing for global rules governing organisations over crypto assets. It noted that virtual currencies were transnational and therefore needed international cooperation to be well regulated and their wider macro-financial effects managed.
Global efforts in crypto regulation
MiCA regulation, set to be enforced in the European Union next year, may transform the crypto-asset landscape entirely.
The Dubai International Financial Centre (DIFC), one of the leading financial hubs in the MEASA region, has introduced Digital Assets Law – the world’s first. Web3 technologies are what the UK government wants to pioneer, and they plan to have formal legislation around cryptocurrency regulation by 2024.
Mainstreaming of Bitcoin
The US Securities and Exchange Commission (SEC) took another step toward mainstreaming Bitcoin by approving 11 exchange-traded funds (ETFs) that allow investors to own spot Bitcoin through a regulated format.
These ETFs have been backed by large asset managers and crypto financial service providers, representing an important milestone towards broader adoption within this space. With this announcement came an increase in value; with bitcoin reaching over $70,000 per coin, which is its all-time high.
India’s approach to Virtual Digital Assets (VDAs)
Even though there has been a lot of progress on the regulation of crypto assets in G20 and major financial centres, India is still figuring out its approach to policy implementation and making regulations around Virtual Digital Assets (VDAs).
In India, VDAs along with Web3 space at large have tremendous potential and possibilities. According to ‘India’s Web3 Landscape 2023’ report by Hashed Emergent in collaboration with KPMG in India, CoinSwitch, Devfolio, and Kratos Gaming Network, the country has one of the biggest web 3 ecosystems worldwide where there are more than 1000 startups based here having employed 12% of all global web3 developers.
It is necessary to change the regulatory conversation from ‘when’ to ‘how’ in the expanding field of Virtual Digital Assets (VDAs). For this reason, India may consider adopting a digital asset strategy that promotes responsible regulation while fuelling growth in the sector.
Government’s role in Web3 development
The government’s involvement is imperative for harnessing the full potential of Web3 and improving business and living environments. It can be creating hubs of excellence, skill development programs, and regulatory sandboxes among other things aimed at supporting entrepreneurs, developers and service providers.
Simplification of Know Your Customer (KYC) processes, proposed during this year’s union budget speech by Finance Minister Nirmala Sitharaman and discussed within Financial Stability Development Councils (FSDCs), should be considered important.
Making C-KYC accessible to compliant exchanges, and revising the tax regime on VDAs to lower TDS rates and streamline tax provisions will help minimise income leakage risks besides AML/CFT concerns.
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