Indian Government Invites Law Firm to Make Suggestions on Crypto Regulation

By Swati Kishore

As was revealed through an RTI report, the Indian government is currently finalizing cryptocurrency regulations. Even though no specific date has been announced for the release of the final draft of the inter-ministerial committee’s report, however, the government is making strides.

Most recently, a law firm called ‘Nishith Desai Associates’ submitted a proposal to the Secretary of Economic Affairs, Subhash Chandra Garg, for suggestions on cryptocurrency regulatory framework.

Subsequently, the government invited the law firm to present its suggestions.

The proposed recommendations by the law firm signal towards a balanced way of dealing with crypto matters.

Points are also made for the self-regulation of the industry, while the outright ban of digital currencies is avoided.

It is to be noted that even though the paper presents suggestions to the Indian government, however, the government reserves its right to not agree to any suggestions made.

A special emphasis is made in the submitted paper for the need to regulate rather than prohibit. It states how a ban on crypto industry would prove to be unfavourable for the growth of the nation.

The paper states:

“History has taught us that such technologies (blockchain) should be regulated and not banned since banning is likely to be counter-productive and may also suffer from legal infirmities.”

The paper also explained the different ways of licensing cryptocurrency-based businesses.

According to the proposal licensing can be achieved through one of the two ways, one, by introducing new legislation, or two, by framing administrative regulations under the existing framework.

The proposal also covers the aspect of the different types of digital assets. Per the paper, the assets can be divided into three categories, namely, security tokens, utility tokens, and payment tokens. It reads:

“For the purpose of legal analysis, all crypto assets are not alike, and the implications of each should be assessed on a case by case basis. Broadly, crypto assets can be considered to be of three types- payment tokens, security tokens, and utility tokens.”

A recommendation is also made for the regulation of security tokens by the financial regulator of India, the Securities and Exchange Board.

Finally, the report also discusses the self-regulation of digital assets.

The authors of the paper had sent the previous committee a paper about self-regulation, however, since the report of the last committee was not made public, hence there is no clarity on what the reaction to the proposed self-regulation was.

As per the authors, the self-regulation suggestions were initially developed for the Digital Asset and Blockchain Foundation of India.