Need global collaboration to regulate cryptos: Modi
It is important that all democratic nations work together on this and ensure it does not end up in the wrong hands, which can spoil our youth, the PM said
Prime Minister Narendra Modi on Thursday called for countries to collaborate for regulating cryptocurrencies to prevent any harmful impact on youth.
Modi’s first public comments on the issue at the Sydney Dialogues is an indication that crypto companies could potentially face greater scrutiny in India.
“Take cryptocurrency bitcoin, for example. It is important that all democratic nations work together on this and ensure it does not end up in (the) wrong hands, which can spoil our youth,” he said in a speech that was delivered virtually. He also called for collaboration in cybersecurity and for developing trusted supply chains, among others.
Modi’s caution comes days after he held talks on how to move forward on cryptocurrency in India, with concerns raised on unregulated crypto markets becoming avenues for money laundering and terror financing.
“There are going to be strict regulations, especially for exchanges. This, in part, could be because of aggressive advertisements in the past. If the government wants to restrict access for the youth to enter, they could introduce something like the accredited investor concept in crypto investment, where somebody with a specified minimum annual income is allowed to invest in certain asset classes,” said Sidharth Sogani, founder and chief executive officer, CREBACO Global, a research, rating and intelligence company focused on blockchain and cryptocurrencies.
The Securities and Exchange Board of India (Sebi) introduced on 11 November the concept of ‘accredited investors’ in the domestic securities market, which provides a relaxed regulatory framework for sophisticated investors and introduces products designed to meet investor-specific risk profiles. This allows the creation of a separate set of rules for areas that need to be tightly regulated, which is for retail investors, and where some flexibility could be allowed, which leads to innovation when dealing with accredited investors. There have been suggestions that cryptocurrencies in India should be regulated by Sebi, with RBI monitoring their inward and outward movements in the country.
Ajeet Khurana, founder of Genezis Network, a think tank for crypto startup investment, said Modi’s statement “expresses the government’s concerns”, which he said were “reasonable” since the crypto industry’s aggressive push to acquire customers “will lead to a buildup of hype and perceived get-rich-quick approach”.
“This also prepares the ground for what we should see in the upcoming Lok Sabha session, where there will definitely be reining in of the entire crypto ecosystem with extra focus on youth,” he added.
India’s crypto industry has seen a boom in the past year, with millions of new users joining the space.
Late October, Nischal Shetty, founder of WazirX, one of India’s top crypto exchanges, said the country had around 20 million users, dismissing an earlier claim by discovery and comparison platform Broker Chooser that there were 100 million crypto holders in the country.
Khurana noted that the largest proportion of participants in the crypto space were youngsters, unlike in other asset classes.
“There might be some threshold requirements to come in terms of investments in crypto. However, just like direct stock market investing, implementing minimum investment in cryptos will be really tough. What sort of restriction should be placed at this point on crypto investing is not clear, but there seems to be a desire that there should be some restriction,” he said.
Earlier in the day, Nithin Kamath, founder of online stock trading platform Zerodha, also spoke up against the crypto industry’s moves.
“If financial services businesses are allowed to mis-sell greed & easy + guaranteed returns from risky financial products, it not only harms consumers but it creates a systemic risk,” Kamath said in a tweet.
Meanwhile, crypto exchanges in India welcomed Modi’s statement, saying it will boost the confidence of the crypto community.
“The Prime Minister speaking about crypto and the need for regulation is a great thing for India. It means a lot to the crypto ecosystem. It further strengthens our belief that India will stay ahead in this global phenomenon,” said WazirX’s Shetty.
Shivam Thakral, CEO of BuyUcoin, said, “We completely agree that, like every great idea, crypto and blockchain should be deployed constructively to generate employment and contribute to the economy of the country. We are optimistic that our regulators will support the young entrepreneurs in their efforts to achieve the dream of digital India.”
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