Crypto Cos Counting on Dual License Regime in New Rules

Cryptocurrency players have suggested dual license for different types of crypto exchanges.

Fiat on-ramp exchanges, which allow people to convert crypto into rupee and vice-versa, require separate rules and regulations from crypto wallets or exchanges, which only allow trading within the crypto universe, industry stakeholders said. “We strongly support a hybrid regulatory body under RBI and Sebi to cater to the emerging block chain/crypto industry,” said Shivam Thakral, CEO of crypto exchange Buy U Coin.

Thakral said a platform that allows on-ramp services for crypto exchanges should be differentiated from ones that only provide trading within crypto. For example, Bitcoin-Ethereum pair allows users to convert Bitcoin into Ethereum and vice versa, while a platform with Bitcoin-INR pair will allow on-ramp exchange. So, both these platforms can apply for different license when considering their business models, he said.

One of the biggest challenges to the adoption of cryptocurrency is the ease with which money can flow between traditional (fiat) and crypto ecosystems and the on-ramp and off-ramp (converting crypto to fiat) exchanges facilitate that transfer.

Once crypto regulations are formulated, all types of global exchanges will make a beeline for India.

The regulations are expected to be exhaustive to allow interoperability between real and digital currencies. Most Indian crypto exchanges currently allow investors to use crypto as an investment asset and do not permit transfer of crypto assets out of the platform.

Some of the bigger international exchanges also have a big proprietary trading book and the intermediary also acts as a counter-party.

Experts said the government will be extra careful while crafting regulations around such exchanges.

“Crypto exchanges can essentially either match the orders between users or act as a counterparty to the trading customers. Globally, too, license is provided as matchmakers, or match-makers with counter-party capabilities. It will be interesting to see what approach the Indian regulators will take,” said Praveen Kumar Vijay Kumar, CEO of block chain company Belfries.

The crypto fraternity is also keeping an eye out for regulations related to ‘custodial exchanges’ and ‘non-custodial exchanges’.

The government, experts said, may also look at certification of exchanges, like the central bank has done to ensure healthy regulation of non-banks.

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