India’s cryptocurrency industry, which has come under the scanner recently, has decided to undergo self-regulation. To this end, the Internet and Mobile Association of India (IAMAI), in association with the country’s leading crypto exchanges such as WazirX, CoinDCX and CoinSwitch Kuber, is setting up an advisory board. The board is expected to review issues, apply best practices and implement a code of conduct for the industry.
On May 31, the Reserve Bank of India (RBI) clarified that banks should not apply its April 2018 circular to penalise customers for transactions involving cryptocurrencies. The circular was subsequently struck down by the Supreme Court. The advisory board will be set up under the Blockchain and Crypto Assets Council (BACC), which is a part of the IAMAI. The board is likely to consist of lawyers, compliance specialists and technical specialists to enable self-regulation.
The code will be binding on all member cryptocurrency exchanges and will include standardised yearly audits, regular know your customer (KYC) checks, routine disclosures of company details, and revaluation of customer risk profile, sources told the Economic Times (ET). The code will also provide a mechanism for customer redressal to deal with cases of fraud and set up an escrow account specifically for crypto transactions.
Working with regulatory and supervisory authorities, such as the Financial Intelligence Unit and the RBI, the board will take note of suspicious transactions. The board, which is expected to comprise three to four external members as well, will also devise a system to certify exchanges that meet its criteria.
"Crypto exchange business activity is legal in India today, but it is not formally regulated yet. There are no prescriptive guidelines. We are trying to make sure the serious players can follow the best global practices. We need to reduce the overall risk and perception of risks,” Naveen Surya, chairman emeritus of the Payments Council of India and a member of BACC’s advisory board, told Moneycontrol.
Sources told ET that the proposals are in the discussion phase and the endeavour is to bring the country’s informal crypto and blockchain ecosystem under one standard authority. The crypto industry has been demanding regulation for the last few months, as exchanges have been witnessing vigorous investment activity despite regulatory uncertainty.