The scalability of financial technology depends on an adaptable legal system. With 93 million cryptocurrency holders, India ranks first in the world. However, India is not among the top 20 countries for favorable cryptocurrency regulations. Establishing a favorable legal system is crucial to the development of India's financial markets, especially with the middle class predicted to reach 90% of the population by 2039.
Regulation of financial markets involves state control, which is in conflict with the decentralized nature of blockchain technology (DLT). As currency issuance is a sovereign function, the challenge is to find a balance between freedom of trade and state oversight.
Current Use of Blockchain Technology in the Cryptocurrency Market
1. Cryptocurrency payments between users that can be carried out through wallets, cryptocurrency exchanges and brokers, including transactions using stablecoins.
2. Trading and investing on centralized cryptocurrency exchanges.
3. Funding the project through Initial Coin Offerings (ICO) and Initial DEX Offerings (IDO).
4. Trading of derivative financial instruments based on cryptocurrency assets.
5. Working with non-fungible tokens (NFTs) and verifying ownership of unique digital objects such as images, videos, audio files, gaming items, etc.
6. Use of crypto applications and platforms based on decentralized finance (DeFi).
Cryptocurrency Regulatory Framework
In March 2020, the Supreme Court of India lifted the ban on cryptocurrencies. Following this, the government introduced the Cryptocurrencies and Official Digital Currency Regulation Bill, 2021. The bill, which is currently being revised, aims to recognise cryptocurrencies as regulated assets by the Securities and Exchange Board of India (SEBI).
The current regulatory landscape remains undefined. Speaking on behalf of the Ministry of Finance, Minister of State for Finance Pankaj Chaudhary said: “Crypto assets are by definition cross-border and require international cooperation to prevent regulatory arbitrage. Therefore, any legislation on this subject can only be effective with significant international cooperation on the assessment of risks and benefits, and the development of common taxonomies and standards.”
The main objective of establishing a favorable legal regime is, on the one hand, to ensure the protection of the rights and legitimate interests of investors who use DLT technologies for financial transactions, and, on the other hand, to prevent cryptocurrencies from being used for terrorist financing, tax evasion and other illegal activities. Thus, regulators need to develop a framework that addresses the following challenges:
1. Define the legal status of cryptocurrencies, which may include classification as a security, commodity, etc.
2. Establish a licensing regime for cryptocurrency exchanges and payment systems that provides strong investor protection from fraud.
3. Implement transparent procedures for customer identification and compliance with anti-money laundering regulations.
4. Develop a favorable tax regime that is competitive with other jurisdictions, making India an attractive country for startups and launching cryptocurrency projects.
According to Ka Yong An, financial market analyst at Octabroker, “The most important issue that regulators need to consider is the regime for digital assets, including cryptocurrencies. If the tax rate is high (5% or more), most people who trade in cryptocurrencies will remain in the gray zone, which will reduce tax revenue on the one hand and increase the risk of fraud and misconduct for cryptocurrency users on the other hand.”
About Octa
Octa is an international broker offering online trading services worldwide since 2011. It offers commission-free access to financial markets and a range of services already enjoyed by clients in 180 countries with over 52 million trading accounts. To help its clients achieve their investment goals, Octa offers free educational webinars, articles and analytical tools.
The company is involved in a comprehensive network of charitable and humanitarian activities, including improving education infrastructure and emergency relief projects supporting local communities.
Since its inception, Octa has won over 70 awards, including “Best Forex Broker 2023” from AllForexRating and “Best Mobile Trading Platform 2024” from Global Brand Magazine.
The scalability of financial technology depends on an adaptable legal system. With 93 million cryptocurrency holders, India ranks first in the world. However, India is not among the top 20 countries for favorable cryptocurrency regulations. Establishing a favorable legal system is crucial to the development of India's financial markets, especially with the middle class predicted to reach 90% of the population by 2039.
Regulation of financial markets involves state control, which is in conflict with the decentralized nature of blockchain technology (DLT). As currency issuance is a sovereign function, the challenge is to find a balance between freedom of trade and state oversight.
Current Use of Blockchain Technology in the Cryptocurrency Market
1. Cryptocurrency payments between users that can be carried out through wallets, cryptocurrency exchanges and brokers, including transactions using stablecoins.
2. Trading and investing on centralized cryptocurrency exchanges.
3. Funding the project through Initial Coin Offerings (ICO) and Initial DEX Offerings (IDO).
4. Trading of derivative financial instruments based on cryptocurrency assets.
5. Working with non-fungible tokens (NFTs) and verifying ownership of unique digital objects such as images, videos, audio files, gaming items, etc.
6. Use of crypto applications and platforms based on decentralized finance (DeFi).
Cryptocurrency Regulatory Framework
In March 2020, the Supreme Court of India lifted the ban on cryptocurrencies. Following this, the government introduced the Cryptocurrencies and Official Digital Currency Regulation Bill, 2021. The bill, which is currently being revised, aims to recognise cryptocurrencies as regulated assets by the Securities and Exchange Board of India (SEBI).
The current regulatory landscape remains undefined. Speaking on behalf of the Ministry of Finance, Minister of State for Finance Pankaj Chaudhary said: “Crypto assets are by definition cross-border and require international cooperation to prevent regulatory arbitrage. Therefore, any legislation on this subject can only be effective with significant international cooperation on the assessment of risks and benefits, and the development of common taxonomies and standards.”
The main objective of establishing a favorable legal regime is, on the one hand, to ensure the protection of the rights and legitimate interests of investors who use DLT technologies for financial transactions, and, on the other hand, to prevent cryptocurrencies from being used for terrorist financing, tax evasion and other illegal activities. Thus, regulators need to develop a framework that addresses the following challenges:
1. Define the legal status of cryptocurrencies, which may include classification as a security, commodity, etc.
2. Establish a licensing regime for cryptocurrency exchanges and payment systems that provides strong investor protection from fraud.
3. Implement transparent procedures for customer identification and compliance with anti-money laundering regulations.
4. Develop a favorable tax regime that is competitive with other jurisdictions, making India an attractive country for startups and launching cryptocurrency projects.
According to Ka Yong An, financial market analyst at Octabroker, “The most important issue that regulators need to consider is the regime for digital assets, including cryptocurrencies. If the tax rate is high (5% or more), most people who trade in cryptocurrencies will remain in the gray zone, which will reduce tax revenue on the one hand and increase the risk of fraud and misconduct for cryptocurrency users on the other hand.”
About Octa
Octa is an international broker offering online trading services worldwide since 2011. It offers commission-free access to financial markets and a range of services already enjoyed by clients in 180 countries with over 52 million trading accounts. To help its clients achieve their investment goals, Octa offers free educational webinars, articles and analytical tools.
The company is involved in a comprehensive network of charitable and humanitarian activities, including improving education infrastructure and emergency relief projects supporting local communities.
Since its inception, Octa has won over 70 awards, including “Best Forex Broker 2023” from AllForexRating and “Best Mobile Trading Platform 2024” from Global Brand Magazine.
