MAY 20, 2022
India's cryptocurrency sector likely to update code of conduct
JAN 19, 2022
Mumbai: Indian cryptocurrency exchanges are weighing updates to their self-regulatory code of conduct to avoid run-ins with regulators.
The move comes amid heightened scrutiny of the sector from regulatory bodies, including the income tax department, enforcement directorate, and others.
ET reported on Monday that the government may delay tabling the Cryptocurrency Bill in the upcoming budget session of Parliament as it wants to hold more discussions and build consensus on a regulatory framework for the nascent sector.
Leading cryptocurrency firms such as WazirX, CoinDCX and CoinSwitch Kuber, as well as other members of the Blockchain and Crypto Assets Council (BACC), are working to update the ‘Code of Conduct (COC)’, sources aware of the matter told ET. BACC is part of the industry body, the Internet and Mobile Association of India (IAMAI). BACC has acted as a voluntary Self-Regulatory Organisation (SRO) for the industry in the absence of formal regulations.
IAMAI and BACC did not respond to ET's queries seeking comment.
On Monday, Prime Minister Narendra Modi called for global corporations to regulate the fast-growing industry at the World Economic Forum’s Davos Agenda 2022 virtual event.
Crypto-selling platforms may add warnings and appropriate banners that highlight volatile nature of the industry while onboarding new customers on their platform, a person familiar with the discussions said. Guidelines are being framed on customer protection measures including protection of customer funds, transaction settlement, and consumer-facing communication, said another person directly familiar with the discussions.
“At present, there is no standardised format for terms and conditions and risk warnings,” one of the people said, requesting anonymity due to the sensitivity of the talks. “We are trying to bring that as well into the guidelines so that the warnings customers get are the same.”
Discussions are also on to appoint a tax expert from one of the Big Four audit firms to conduct an audit and tax compliance strategies to members.
Some crypto selling platforms have been under scrutiny by the Directorate General of Goods and Services Tax Intelligence (DGGI) for alleged tax evasion.
The idea behind tweaking the code is to also address concerns raised in the discussions held between crypto selling platforms and the Reserve Bank of India (RBI) last year as well as in the Parliamentary Standing Committee around investor protection and regulating the broader industry.
The key areas being debated by members of the BACC, which comprise crypto exchanges, decentralised finance startups, and NFT marketplaces, include measures to enhance consumer protection by introducing warnings and having standardised tax practises.
“When you look at the fundamental issue which the RBI and the government had raised was whether the investor is informed well enough about the risks associated with investing in crypto,” said one of the industry sources working with the crypto companies. “Either through your ads or through onboarding process or through Know Your Customer process, are you embedding this fact that what you're doing and proposing is risky?"
The code of conduct adopted by members of the BACC acts as a guide in the absence of any formal regulations.
In the last six months, crypto selling platforms have been under the lens of various government bodies due to the rising adoption of crypto by retail users.
The self-regulatory code acts as a guide for the industry to introduce uniform practises. Compliance with the COC is voluntary. Of late, exchanges have become stricter about pulling up members that violate the code or bring the broader industry under the scanner of regulators.
The updated code will also include the Advertising Standards Council of India (ASCI) guidelines on crypto ads, which are expected to be introduced soon.
“ASCI has been in advanced talks with several stakeholders including the government in framing its crypto advertising guidelines that will work to protect the consumer’s interests. These are expected to be finalised shortly,” said Manisha Kapoor, general secretary, ASCI.
ET reported earlier this month that crypto exchanges had prepared an initial do’s and don'ts list for advertisements that deal with cryptocurrencies.