Regulatory Challenges in Cryptocurrency: An India Perspective

Abstract

Cryptocurrencies are emerging as a prominent investment avenue among investors, they have been in the limelight in recent times due to ongoing debate on the regulation of these assets. Governing bodies across the world are facing the dilemma of acknowledging and regulating these instruments. This paper traces the current regulatory framework across the world and identifies the India specific challenges in regulating cryptocurrency. Some of the key challenges that the regulatory authorities face concerning crypto assets are: classifying cryptos as a mere asset class due to their complex features and intended purpose of creating an alternate means for barter, financial transactions and investments; decentralised nature of the assets which complicates levying of laws; money laundering, terrorist financing is rampant with digital currencies; cryptocurrency has been able to radically democratize the ability of start-ups to raise funds, regulation should continue to empower small businesses to borrow from a wide variety of funding community but monitor and curb activities which are not conducive for the business ecosystem. This paper ascertains the key challenges in regulating cryptocurrency by studying various documents, reports, journals across nations, aligning the challenges with an Indian context and tracing the changes in regulatory norms concerning crypto assets over the past decade, to assess the future of cryptocurrencies in India. This study is particularly important due to the lower rate of financial literacy, the constraints within which regulatory authorities continue to operate and the unique financial ecosystem of India. This bird’s eye view of regulatory norms and the existing challenges will enable regulators to build a framework that is conducive for growth and aligns with the existing financial ecosystem.