INDIA Trends and Developments Contributed by: Shilpa Mankar Ahluwalia, Himanshu Malhotra and Lidia K. Kharmih, Shardul Amarchand Mangaldas & Co
Cryptocurrency and Blockchain Cryptocurrency
fees transparently disclosed to participants. The RBI also prohibited the practice of matching or mapping participants within closed user groups. These directives collectively aim to ensure the proper functioning of P2P Platforms, emphasis - ing fair practices, operational integrity and the protection of stakeholders involved. Industry Developments Self-regulatory organisation(s) for the fintech sector At the start of 2024, the RBI had issued a draft version of its proposed framework for recognis - ing self-regulatory organisations for India’s fin - tech sector (SRO-FT), inviting comments from stakeholders. After considering the feedback, the regulator notified the finalised framework (SRO-FT Framework) in mid-2024, opening invitations for applications from entities that provide technological solutions for businesses and consumers to access financial products and services or that are subject to RBI regula - tory and supervisory oversight, on account of partnerships with REs or otherwise. Recognising that regulation of the fintech sec - tor will be a delicate balancing act, given its dynamic and prevalent nature, the regulator has introduced the SRO-FT Framework in a bid to achieve such balance. In addition to developing industry standards and best practices and encouraging compliance by its members, SRO-FTs are poised to act as an intermediary between participants in the fintech sector and the RBI. The RBI has since granted SRO-FT recognition to the Fintech Association for Consumer Empowerment and is in the pro - cess of reviewing applications from other entities as well.
Cryptocurrencies/virtual digital assets are not recognised as legal tender in India, but the country has shifted from an earlier stance of a complete ban to one that emphasises regula - tion. It has been reported that the Securities and Exchange Board of India (SEBI) has recom - mended that rather than having a single, cen - tralised regulator for cryptocurrencies, several regulatory bodies should supervise activities related to cryptocurrencies that are under their purview. Reportedly, SEBI has expressed that it could regulate new offerings of cryptocurren - cies, known as “initial coin offerings” and cryp - tocurrencies related to the equity market. The Government of India has also previously issued a notification (commonly referred to as the VASP PMLA Circular) that classified virtual asset service providers (VASPs) as reporting entities under the Prevention of Money Laun - dering Act, 2002 (PMLA) and its associated rules. Subsequently, the Financial Intelligence Unit-India (FIU-Ind) released a set of guidelines titled AML & CFT Guidelines for Reporting Enti - ties Providing Services Related to Virtual Digital Assets. These measures reflect India’s approach to creating a more structured and transparent regulatory framework for virtual digital assets while addressing concerns related to money laundering and financial crime. Blockchain The Indian blockchain landscape is experienc - ing rapid growth and diversification. Traditionally associated with cryptocurrencies and smart con - tracts, blockchain technology is now expanding into areas such as supply chain optimisation, governance initiatives, and specialised financial applications.
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