It has been seven months since the top court in India granted permission to banks to legally provide their services to crypto platforms. Since then, there has been an increase in trade volumes and users at most local exchanges. However, regulators haven’t said much about the rules pertaining to crypto trading. This kind of confusion can prove to be detrimental to market growth. Therefore, in order to bring about some clarity, some members of the Indian crypto community are pushing for a sandbox approach. Under this approach, platforms will be able to remain active in a separate part of the market, being supervised by the regulators.
BuyUCoin was the crypto exchange that initiate it and a regulatory framework would be proposed by the sandbox for bringing crypto under the existing regulations. At the same time, it would provide startups with a supervised space for developing in this sector. The proposal also includes the development of an open-source interface that can be used for managing know-your-customer (KYC) and anti-money laundering (AML) compliance and tracking crypto transactions. The interface would pool information from providers and exchanges, and funnel it to governing councils and regulators through an API, or application programming interface.
Released on October 10th, the API white paper and draft policy draws parallels to the approaches implemented by the Monetary Authority of Singapore (MAS) and the Financial Conduct Authority (FCA) in the United Kingdom. According to the framework document, even though operational sandboxes have been provided by the Indian central bank for fintech platforms and retail payments, they haven’t done the same for cryptocurrencies. Crypto regulation in India has been a kind of rollercoaster. In 2018, when the market was fledgling, the Reserve Bank of India, the central bank imposed a ban on banks when it came to providing their services to crypto businesses.
The restriction was overturned this year in March by the nation’s Supreme Court, after nearly two years of protracted legal proceedings. In September, there were rumors flying about another ban on crypto trading, but no such announcement was made. CEO of BuyUCoin, Shivam Thakral stated that the idea of a sandbox became relevant after the overturning of the RBI bank. Thakral stated that regulations were of the utmost importance for the Indian cryptocurrency market in order to protect users from becoming victims of fraudulent activities. As compared to the international market, Indian crypto users don’t have personal wallet security or data security.
It was also noted in BuyUCoin’s document that since there is no regulatory framework, users are unable to report legitimate crypto earnings for tax reasons and this can limit investor protections. Eventually, it will discourage flow of money in the markets. The regulations that have been proposed hope to deal with this issue by involving banks in the process of customer vetting, which will create a supervised sandbox for crypto startups. It will also convince the government to come up with a dedicated regulatory body for monitoring digital assets and their transactions within the country.