The government in India is expected to table a bill that, among other things, bans “private cryptocurrency”, making it “one of the world’s strictest policies against cryptocurrencies“.
One of the companies I advise, a tech-enabled wealth management service, has offered alternative assets for a few years now. Those include securitised debt, digital gold, P2P lending, settlement financing, portfolio management services, among others. I’ve gotten to see how they have been regulated – or not.
And I wonder if India’s government, central bank and capital markets regulator could apply some variation of these existing regulations to cryptocurrency, especially when held or traded as an asset.
The government could cap the amount of Indian rupees invested in cryptocurrency across all crypto exchanges. This is like P2P lending, which was initially capped at INR ten lakh, and expanded to INR fifty lakh subject to a few net worth criteria. The RBI controls the toll gates to crypto – the on ramps to transfer money from a bank account to a crypto exchange to buy crypto. That makes it possible to enforce these limits.
The government could set a minimum amount to hold in cryptocurrency. That puts it out of reach of the most vulnerable small investors who the government ostensibly wants to protect. This is like portfolio management services, whose investment minimum was recently doubled from INR 25 lakh to INR 50 lakh.
It could restrict investment in cryptocurrency to accredited investors, a qualification that’s well known in the USA but which the capital markets regulator has only just proposed. So instead of investment minimums or caps, the investor needs to have a certain minimum net worth or annual income. As of this writing, the qualifications are so strict, only a few tens of thousands or very low hundreds of thousands will quality.
(Part 2 – while each of these three are workable, I describe what I’d rather do)