2021-03-29 01:30:00

Cryptocurrency collective to reach out to FM, RBI to address concerns

MUMBAI: Several cryptocurrency exchanges operating in India plan to jointly reach out this week to the country’s top financial decision makers, including Finance Minister Nirmala Sitharaman and the central bank, to suggest solutions aimed at establishing the investment credentials of an asset class that faced stiff regulatory resistance in the past.

Nischal Shetty, co-founder and CEO of the crypto exchange platform WazirX, said that the Blockchain and Crypto Council, a subcommittee under the Internet Mobile Association of India, has drafted a presentation note. ET has reviewed the note with recommendations on how to regulate crypto and address risks associated with cryptocurrencies, such as money laundering, the threat to rupee, and the industry’s environmental impact.

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This presentation will also be shared with the Department of Economic Affair and the Ministry of Electronics and Information Technology, Shetty said.

On February 24, central bank governor Shaktikanta Das reiterated his concerns over cryptocurrency and advocated a ban.

“We have certain major concerns about cryptocurrency. We have communicated them to the government,” Das said in a TV interview. “..on crypto we have major concerns from a financial stability angle which we have shared with the government,”

Shetty, who is part of the push along with six other exchanges, said that the crypto exchanges have used the last two months to understand the concerns of the officials and come up with a comprehensive set of solutions.

The presentation note includes a code of conduct for crypto exchanges to follow on day-to-day operations, a white paper that highlights the possible effects of the proposed ban on crypto assets in India, and data of global regulatory landscape, among other things. Shetty said this is the first time that the industry is sending a presentation with data and relevant content and that the previous reach outs have been over emails.

“Eventually, our hope is that we will be invited where we can present our case formally. But we did not want to wait, we wanted to take a proactive approach,” he said.

The first time RBI expressed its concerns about virtual currency was in 2013 when it issued a Financial Stability Report and later that year, a warning to the users, holders, and traders of virtual currencies about its potential risks. However, since 2013, the crypto exchanges and investors in India have only increased.

Between 2015-2018, Unocoin and ZebPay reached out to the RBI four to five times to mitigate concerns. These communications included an overview of the crypto industry and recommendations on how to regulate crypto in India, according to Sathvik Vishwanath, co-founder and CEO of Unocoin, the oldest crypto exchange in India.

“We have approached different high-level officers at the RBI, but it’s only been a one-way conversation. They were not disclosing what they want. They were receiving our documents so whatever we were trying to say, they were listening to our conversations, but that’s pretty much where it was stopping,” Vishwanath said.

However, there is a belief on the other side that the industry did not take RBI’s warnings seriously and now a breakthrough between the two parties may be hard to materialise.

The RBI did not respond to ET’s query.

Since 2018 when the RBI banned banks from dealing in crypto, CEOs of crypto exchanges say that they have engaged in multiple informal conversations with federal lawmakers. Ever since market talk has surfaced about a bill banning all ‘private’ cryptocurrencies, the industry doubled down on its efforts to address concerns of officials, they added.

“The industry as a whole has begun self-regulation and implementing KYC procedures to prohibit illicit activities,” Vishwanath said. “We have created a unified procedure that gets followed among the exchanges so that when we try to represent as an association in front of the ministry we will have a concrete method which could add to our credibility.”

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