INTERVIEW: The Indian Government is asking experts these questions as it mulls over the crypto bill — and the metaverse isn’t one of them yet

INTERVIEW: The Indian Government is asking experts these questions as it mulls over the crypto bill — and the metaverse isn’t one of them yet
The Indian government isn’t even thinking about the metaverse — the crypto bill will focus mostly on crypto exchange-related issuesIANS/Canva/BI India
  • As the Indian government mulls over how to regulate the crypto industry, the metaverse is far from its list of priorities, according to two insiders.
  • In an interview with Business Insider, WazirX’s head of policy Aritra Sarkhel and founder of Policy 4.0 Tanvi Ratna dive into what has been discussed behind closed doors this past year.
  • According to them, the government is mostly focused on how to regulate crypto exchanges, with a little bit of curiosity on how to tax non-fungible tokens (NFTs).
As the Indian government looks to regulate the crypto industry, it’s focus — at least, for now — will be on crypto exchanges. The metaverse, non-fungible tokens, and other burgeoning use cases within the crypto universe are not currently on its radar, according to two insiders.

Business Insider spoke to Policy 4.0's founder, Tanvi Ratna, and WazirX's head of policy and governance issues, Aritra Sarkhel, who have been part of the high-level meetings with government to work out the kinks in the crypto bill, including a couple of them last week. They have been answering questions from the bureaucrats before the cryptocurrency bill is sent to cabinet for approval.

Majority of the questions asked by the government to the industry, so far, have involved the classification of crypto assets, the process and legality of listing coins on exchanges, rules for cross-border transactions, and other trading aspects.

“I don’t think the metaverse has really entered the room yet, here,” Tanvi Ratna, the founder and chief executive of Policy 4.0 — an independent research and strategic advisory body currently working with the government on the crypto bill — told Business Insider.

“Listen, nobody is discussing the metaverse at the highest quarters. We’re discussing cryptos and exchanges and NFTs a little bit. I don’t think people are discussing the metaverse,” added Sarkhel, during the webinar series 'Hello crypto!' sponsored by the WazirX.

The current version of India’s crypto bill, if it makes it into Parliament this session, will be focused on regulating crypto exchanges and crypto trading aspects of the cryptoverse, according to Ratna and Sarkhel.

Behind closed doors — what is the government asking about the world of crypto?

“Most of the chatter that has happened behind closed doors has been on the exchange side of the business, but more chatter needs to happen on the other aspects of crypto and blockchain,” Sarkhel told Business Insider, “What has happened in the last one year is that there are a lot more bureaucrats, a lot more different parts of the government that have gotten involved.”

And, they’ve been curious about the anonymous nature of cryptocurrencies, what differentiates one token from another, and the differences between the workings of a crypto exchange versus a traditional exchange.

Moreover, there’s been an effort to understand how cryptocurrencies impact money laundering. “There’s also a national security angle over here now, there are folks from intelligence who are involved,” said Sarkhel. Their concerns are around how cryptocurrencies can be used to fund anti-national activities and the preventional of overseas fraud.

So, why is the crypto bill taking so long?

While some of the questions may sound straightforward, the cryptoverse has a lot of nuances that can’t be translated into the traditional financial framework. First off, there is debate over whether or not there should be legislation to address the crypto industry in the first place, according to Policy 4.0’s Ratna.

There has been more public pushback by the RBI since the start, where they have never even been in favour of legislation because it gives legitimacy to whatever you regulate.

Tanvi Ratna, founder and CEO of Policy 4.0, told Business Insider.

Secondly, if you’re bringing in regulation, there are questions around if the existing laws are enough, who will be the regulator — the reported frontrunner is the Securities and Exchange Board of India (SEBI) — and if new laws need to be brought in.

“This is going to be a phased process. What you are going to see right now is one set of regulations, which will deal with a very limited set of issues,” explained Ratna.

What can we expect to see?

“There will be more clarity on ‘what crypto assets are’ in terms of definition from the government, in terms of how you can register crypto exchanges in India — both Indian owned companies and foreign exchanges who have entered India,” said Sarkhel.

Ratna proposes setting up a ring fence because there may be a debate over whether cryptocurrencies are commodities, securities or assets, the one underlying commonality they all have is that there’s always going to be a cryptographic key pair — a public key and a private key.

“First you put a ring fence. Then, you divide up the responsibilities of who is looking into what kind of activity,” she explained, “Even if you build a new regulator… it will end up being an amalgamation of all the [existing] regulators.”

According to a report by the Economic Times, India’s crypto bill may not make it into Parliament this time around either. The government is considering changes to the proposed framework, which may require wider consultations and more comments from the public.

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