India should consider a sandbox regulatory approach to address issues related to crypto products and services, economic think tank GTRI said in its report on Sunday.
Regulatory sandboxing generally refers to live testing of new products or services in a controlled/testing 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 acceptance of cryptocurrencies in the regular US financial system, it remains to be seen how India's crypto policy will evolve in the coming months.
With the new US action, with ramifications on global capital flows, the price of gold and foreign trade, it may not be possible to live without regulation, he said.
"India may consider adopting sandbox regulatory approaches, allowing controlled testing of innovative cryptocurrency-related products and services. It may need to balance innovation with risk management and adapt advances in blockchain technology," says the report.
He added that any approach must take into account the central issue that the anonymity of cryptocurrencies can be exploited for illicit activities such as money laundering or financing criminal organizations.
So far, US regulation does not address this fundamental issue, according to the report.
"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 legal safeguards," said GTRI co-founder Ajay Srivastava.
He said that the United States has allowed investments in bitcoins through its stock exchanges and this means the integration of cryptocurrencies into traditional finance and equates them with stocks and bonds.
On January 10, the US Securities and Exchange Commission (SEC) approved 11 applications for spot Bitcoin exchange-traded funds (ETFs), according to the report.
He also said that allowing free trading of Bitcoin through stock markets could spread its volatility to the entire stock market.
"Bitcoin's unpredictable price changes could affect a larger number of investors, including those who may not be fully aware or prepared for the inherent risks of cryptocurrency investments," he said.
(Only the title and image of this report may have been modified by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First published: January 14, 2024 | 11:24 am IS
