INDIA Law and Practice Contributed by: Shilpa Mankar Ahluwalia, Himanshu Malhotra and Purva Anand, Shardul Amarchand Mangaldas & Co
6. Marketplaces, Exchanges and Trading Platforms 6.1 Permissible Trading Platforms Under Indian law, the key marketplaces and trading platforms for trading in securities are registered stock exchanges and privately man - aged platforms operated by stockbrokers, each of which is registered with SEBI. Stock exchanges facilitate trade in a number of assets such as equity, equity derivatives, cur - rency derivatives, commodity derivatives, debt securities, units in pooled investment vehicles such as infrastructure investment trusts and real estate investment trusts. Different asset classes are governed by varying regulations, depend - ing on the nature of the asset (eg, equity-linked, debt-linked or pooled investment vehicle). The principal regulators for stock exchanges are SEBI, the Ministry of Finance and RBI, depend - ing on the asset class being traded on the stock exchange. Stock exchanges are highly regulated entities and also operate as quasi-regulators, to some extent, by enacting their own separate by-laws and guidelines which govern trading in securities on the stock exchange. In addition to traditional stock exchanges, RBI has also recognised electronic trading platforms for transactions in financial market instruments regulated by RBI. Such electronic trading plat - forms must be registered with RBI and must comply with minimum capital norms, technologi - cal standards and other safeguards. 6.2 Regulation of Different Asset Classes See 6.1 Permissible Trading Platforms .
6.3 Impact of the Emergence of Cryptocurrency Exchanges
The RBI and the GOI exhibit a marked reluc - tance to acknowledge cryptocurrency as a legiti - mate form of currency in India. However, over the last year, their stance on cryptocurrency has softened from “complete ban” to “regulation” approach, in line with the global developments in the cryptocurrency space. Indian regulators are therefore now focused on regulating crypto-intermediaries (including crypto-exchanges) with rules centred around KYC requirements, consumer protection, dis - closures and reporting requirements. The GOI recently brought all virtual asset service provid - ers (VASPs, which include crypto-exchanges) under the ambit of PMLA. The Financial Intelligence Unit of India (FIU-Ind) subsequently published the AML & CFT Guide - lines for Reporting Entities Providing Services Related to Virtual Digital Assets (FIU-Ind Guide - lines), which came into effect from 10 March 2023. Every VASP operating in India needs to: (i) register with the FIU-Ind; (ii) adopt the pre - scribed KYC verification processes to verify the identity of users at the time of onboarding; and (iii) comply with PMLA requirements (for exam - ple, maintaining transaction records, reporting of suspicious transactions and specified trans - actions to the FIU-Ind). The FIU-Ind has, in the past, served show cause notices to several cryp - to-exchanges for failing to register and directing the GOI to block their URLs. Additionally, advertisements dealing with crypto - currency and/or virtual assets must contain ade - quate risk disclaimers and must not equate such products with regulated products – in accord - ance with the code issued by the Advertising Standards Council of India.
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