Consider a regulatory sandbox approach to addressing crypto issues: GTRI
India should consider a regulatory sandbox approach to address issues related to crypto products and services, economic think tank GTRI said in its report on Sunday.
Regulatory sandbox usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may or may not allow certain relaxations for the limited purpose of testing.
The Global Trade Research Initiative (GTRI) said that in light of the adoption of crypto into the mainstream financial system in the US, it remains to be seen how India’s crypto policy will evolve in the coming months.
With the new US action, which has consequences for global capital flows, the gold price and foreign trade, it may no longer be possible to live without regulation, the report said.
“India could consider adopting a regulatory sandbox approach, allowing controlled testing of innovative crypto-related products and services. It may need to balance innovation and risk management and adapt to advances in blockchain technology,” the report said.
It added that any approach must take into account the core problem that the anonymity of cryptocurrencies can be exploited for illegal activities such as money laundering or financing criminal organizations.
US regulations so far do not address this core problem, the report said.
“Despite these uncertainties, a crypto market exists in India through peer-to-peer trading and offshore exchanges. However, investors face risks due to lack of regulatory safeguards,” said GTRI co-founder Ajay Srivastava.
He said that the US has allowed investments in bitcoins through its stock exchanges and this means integrating cryptocurrency into traditional finance and bringing it on par with stocks and bonds.
On January 10, the US Securities and Exchange Commission (SEC) approved 11 applications for spot Bitcoin exchange-traded funds (ETFs), the report said.
It also said that allowing free trading of Bitcoin through the stock markets could spread its volatility across the entire stock market.
“Bitcoin’s unpredictable price changes could impact a wider range of investors, including those who may not be fully aware of or prepared for the inherent risks of investing in cryptocurrencies,” the report said.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)
First print: January 14, 2024 | 11:24 am IST