India Proposes Interim Crypto Regulation Amid Ongoing Ban Debate

India has proposed an interim solution to regulate its crypto market while lawmakers work on permanent legislation. A parliamentary committee recommended allowing industry-run Self-Regulatory Organizations (SROs) to oversee the market under the Reserve Bank of India (RBI) or Securities and Exchange Board of India (SEBI). The SROs would focus on investor protection, including auditing exchange reserves and separating customer funds from company balance sheets.

The proposal comes after the RBI pushed for a ban on crypto transactions, citing concerns about dollar-pegged stablecoins interfering with India's monetary sovereignty. Tax officials also support a ban, arguing that offshore trades are difficult to track. However, critics argue that the current taxation system has driven activity out of the country.

The committee observed regulatory systems in the UK, Singapore, the US, and the EU before recommending SROs as an interim solution. The government is expected to draft robust legislation and legal definitions for digital assets to support the SROs.