The recent raids on a crypto exchange, as well as allegations of opacity surrounding its shareholding and failure to conduct a KYC check, are seen as the latest setback to market participants’ efforts to establish a regulatory framework.
With the recent drop in cryptocurrency prices, the “asset’s” strength has already come under scrutiny, especially after agencies like the Reserve Bank of India and even a section of the finance ministry have expressed concerns about its long-term viability.
With the house divided, the government chose to postpone an immediate decision last winter, with Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman calling for global cooperation, contending that steps taken by one country alone would not be enough to regulate it. In any case, given the regulatory vacuum in the country, exchanges were forced to slow after Sitharaman brought it under the tax net and also introduced TDS in the last Budget, even though a ban or regulation was still being debated.
The rush to regulate had also slowed, owing to the fact that the investor base was not as large as 1.5-2 crore, as some exchanges claimed. The numbers are probably a third of what was cited, an officer said, adding that the majority of investors had very small ticket sizes.
However, officials have indicated that the government, which is finalizing the agenda for next year’s G20, may push for discussions during India’s presidency in 2023.
Officials have stated that internal consultations are underway, primarily involving the finance ministry and regulators and that a blueprint will be completed soon. However, the latest set of actions is expected to put those discussions on hold as regulators around the world keep a close eye on the product, which has gained massive popularity among the younger population.
The central bank and others have articulated some of the concerns, such as crypto assets being used as a money laundering tool and opaqueness, which the agencies are currently investigating, said an officer.
The Enforcement Directorate announced last week that it had raided and frozen the bank accounts of one of the directors of Zanmai Lab, which owns crypto exchange WazirX. It accused the entity of assisting other entities in transferring funds out of the country via cryptocurrency.
