The Securities and Exchange Board of India (SEBI) has always been the regulatory body regulating the capital market in India. Recently, they further expanded SEBI's mandate to include regulation of virtual currencies as well. The move aimed to curb illicit activities associated with cryptocurrencies, such as money laundering or terrorism financing.
This blog post discusses SEBI's changes and their implications for investors and exchanges dealing in crypto-assets. It also provides an overview of how these new regulations will help protect stakeholders like retail investors who might not be aware of the risks involved in digital assets.
What were the changes made by SEBI?
The amendments help bring these unregulated entities under the purview of India's central banking institution. These entities will now have to follow a host of new rules and regulations under the Prevention of Money Laundering Act (PMLA), with several other inclusions.
Most notable among these inclusions are:
- A ban on banks from doing business with exchanges until they have obtained an appropriate license from SEBI
- Required registration of all exchanges/companies are providing such services
- A minimum KYC (Know your customer)/ AML (Anti Money Laundering) regimen for all accounts and transactions
What does it signify for investors in the Indian Crypto Mark?
The amendments made by SEBI will make it harder for unregulated entities to operate in India and provide a massive boost to the legitimacy of exchanges that SEBI already regulates.
For retail investors, trading on a regulated platform will mean:
- Increased transparency in the market
- Strict adherence to anti-money laundering measures by exchanges/companies providing such services
With India's large population supporting the government's ambition to increase investors' transparency and safety, SEBI has taken significant steps to make the country a safer place for retail investors.
How will these regulations help protect retail investors?
Retail investors unprotect in crypto markets due to a lack of clear guidelines. SEBI's regulation aims to protect these consumers by curbing illicit activities associated with cryptocurrencies, such as money laundering or terrorism financing. One of the significant issues faced by exchanges dealing in virtual currencies is compliance related to Anti Money Laundering (AML) measures.
AML requires businesses to collect KYC details for transactions over a certain amount, making compliance with these regulations extremely cumbersome. SEBI has resolved this issue by requiring exchanges to submit KYC details for any user on their platform regardless of the number of transactions.
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