Indian Web3 Players Call SEBI’s Vision for Distributed VDA Governance Encouraging, Pragmatic

The Securities and Exchange Board of India's (SEBI), this week, said it could work with the RBI and Insurance Regulatory and Development Authority of India (IRDAI) to monitor India's digital assets sector. In its suggestion to the government, the Indian markets regulator said it could oversee cryptocurrencies that can be seen as securities as well as keep an eye on Initial Coin Offerings (ICOs). As part of SEBI's advice, the RBI and the IRDAI could respectively keep checks on fiat-backed stablecoins, and virtual assets related to insurance and pensions.

Essentially, the SEBI has suggested that instead of having one particular body governing the virtual digital assets sector, a collection of already established government bodies can distribute the oversight on this up-and-coming sector.

In conversation with Gadgets360, Edul Patel who heads the crypto investment platform Mudrex said, SEBI's recognition of the VDA sector in India is a positive sign in itself. In addition, its advice to distribute the oversight on the VDA sector among different bodies will leverage the expertise of various financial authorities, thereby enhancing regulatory clarity.

“SEBI's proposal for multiple regulators to oversee the Virtual Digital Assets (VDAs) sector represents a balanced and pragmatic approach. It is a progressive stance that acknowledges the multifaceted nature of VDAs. Moreover, it can help in building investor confidence, as a well-regulated environment reduces the likelihood of market abuses and enhances the overall integrity of the ecosystem,” Patel said.

The Web3 sector in India has shown growth in recent years, that has fetched the attention from the government towards this industry. From three percent in 2018, India's global share of blockchain developer pool, rose significantly to 12 percent last year, as per a recent report by Hashed Emergent, an India-focussed Web3 venture firm. The report also noted that India, out of 150 nations, has claimed the top spot for on-chain adoption in 2023 with over 35 million trading accounts on the top Indian exchanges.

In 2023, when India was presiding over the G20 group, it prioritised the formulation of a crypto roadmap that could work uniformly in all of the countries that are part of the G20. Internally as well, the country has been gradually deploying regulations over the Web3 sector in order to make sure that these digital assets are not exploited to facilitate illicit cross border money transfers for laundering or terror financing. India, for instance, has been taxing crypto incomes and activities since 2022. Indian crypto players are also mandated to comply with KYC and Anti-Money Laundering laws.

Rajagopal Menon, the Vice President of Indian crypto exchange WazirX, said it is only a matter of time before the impact of government's decision start to show on the Web3 sector – because of which a calculated approach is undeniably necessary.

“These are suggestions / recommendations; let's see what the final form will be, whether we have multiple regulators or a single one,” Menon told Gadgets360. “India has already taken baby steps towards regulation by imposing taxes and bringing crypto under PMLA. According to the G20 Delhi declaration, all signatory countries have to have crypto regulation in place by 2025. This report suggests that the government has set the ball rolling for regulations.”

While government bodies like the SEBI, the RBI, and the IRDAI are taking active steps to assist the government to govern the VDA sector without supressing its use cases and growth possibilities, the industry itself is working to adopt some self regulatory practices.

The Bharat Web3 Association (BWA), which is the industry advisory body headed by Dilip Chenoy recently laid down a bunch of self-regulatory guidelines to streamline the process of token listings for crypto exchanges operating in India. The aim of these rules is to ensure that scam tokens and potentially risky cryptocurrencies do not enter the Indian Web3 ecosystem.

CoinSwitch founder Ashish Singhal, who is also a member of the BWA took to X to comment on SEBI's latest suggestion to the government.

“Encouraging views on crypto from the SEBI which has overseen India's thriving stock markets. An enabling regulatory environment has paved the way for greater consumer adoption in several other sectors in the past such as telecom, information technology, e-commerce, etc. This is a start and many nuances will need to be discussed. Nevertheless, great news for crypto in India,” Singhal said.