Latest News - India’s cryptocurrency industry draws up 'legitimacy plan'

The nascent crypto industry of India will overhaul and standardize disclosure and compliance mechanisms in an attempt to establish itself as a legitimate company in the eyes of legacy financial players, our news sources reported.

Efforts accelerated after the Reserve Bank of India (RBI) made it clear that banks should not apply its April 2018 circular, which the Supreme Court struck down in 2020, to penalize clients for trading with cryptocurrencies.

As per news Sources, major crypto exchanges in India, including WazirX, CoinDCX, and CoinSwitch Kuber, have partnered with the Internet and Mobile Association of India (IAMAI) to create an advisory board to implement an industry code of conduct, people familiar with the matter told. The board will be established within the framework of the Blockchain and Crypto Assets Council (BACC), which is part of IAMAI, and will function as a self-regulatory organization for the sector.

The code, in operation since last year, will be applicable to all member crypto exchanges. This will include standardized annual audits, routine company funding, and information disclosures, repeated know-your-customer (KYC) checks, improved data storage standards, as well as a reassessment of the customer's risk profile, the sources said.

The Board will coordinate with regulatory and supervisory authorities, such as the Financial Intelligence Unit and the Reserve Bank of India, to report suspicious transactions. The board, which will be made up of three to four external members, will establish a mechanism to certify exchanges that meet its standards.

"India's cryptocurrency industry is modern and thriving. There must be a sufficient balance between regulation and supervision to allow businesses to grow," said Navin Surya, Honorary Chairman of the Payments Council of India and a member of the BACC`s Advisory Board. Much needed clarity. The industry welcomes steps to improve due diligence and regulations. "

According to the News sources, the proposals are in a "discussion stage" and the intent is to bring dispersed and unofficial crypto and blockchain ecosystem of India under one standard authority.

"As we speak, the board of directors is still in process and roles/responsibilities have yet to be assigned. Until now ..." exchanges and association have only agreed for a code of conduct and the full-blown self-regulated code is being drafted" Sathvik Vishwanath, co-founder, and CEO of crypto exchange Unocoin and member of BACC said.

BACC has 12-15 exchanges and many small blockchains and cryptocurrency startups.

Discussions gained momentum earlier this week, with meetings between CEOs and compliance officers of prominent IAMAI members on formalizing the Government board.

The Internet and Mobile Association of India (IAMAI) declined to comment.

Challenges Galore

Sources said many challenges must be overcome first. For example, none of the big four audit firms in India currently offer audit services for cryptocurrencies.

According to our News sources, there is no fixed number of crypto companies operating in India. It is estimated that at least 50 are actively working on customer qualification and collectively processing transactions worth more than Rs 15,000 crore a year.

Interest in cryptocurrencies has increased in the last 15 months along with the rising trend of bitcoin and other virtual assets globally. However, there is still no legislation or normative act that regulates this ecosystem, which generates confusion among clients, companies, and financial institutions that provide banking services.

In recent months, several leading banks and payment gateways have eliminated cryptocurrency transactions, citing unclear regulations. Some banks have warned customers and payment brokers citing the 2018 RBI circular, although it was rejected by the Supreme Court after IAMAI and cryptocurrency exchanges filed a petition.

"Cryptocurrency is a lucrative business for payment gateways. But due diligence on the lines of KYC, money laundering, and terrorist financing is essential before we incorporate these companies," said Vishwas Patel, CEO of CCAvenue, the payment gateway.

Two bankers told us, on condition of anonymity, that they would reassess the situation and take a fresh call following the RBI clarification. Several banks lack the technical expertise, at this stage, to conduct a supervisory evaluation of these transactions. "We are studying it, like all other banks," said a senior executive at a leading bank.

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