Lack of thorough rules hinders the country’s Web3 potential, although a change might come next year.
India leads the globe in grassroots crypto usage, but its crypto and Web3 regulatory structure is still developing. Dilip Chenoy, Chairman of the Bharat Web3 Association (BWA) and former Secretary General of the Federation of Indian Chambers of Commerce and Industry, discussed India’s growing virtual digital asset (VDA) ecosystem in an exclusive interview at India Blockchain Week 2024.
According to Chenoy, “There is no comprehensive regulation covering the Web3 space in India yet.” He continued by saying that the Ministry of Finance and Ministry of Electronics and Information Technology (MeitY) are meeting with industry stakeholders, but that developers, exchanges, and investors all face difficulties due to the lack of clear guidelines.
Chenoy said that “the Financial Intelligence Unit (FIU) regulates VDA activity for anti-money laundering and counter-terrorist funding. If you advertise, ASCI rules apply. Crypto income is subject to 30% income tax and 1% TDS.”
Chenoy also noted advances in state governments and blockchain developers working on localized use cases like caste certificate issuing and digitized university records. He recognized the difficulties developers experience in creating corporations and following unclear requirements for Web3 startups in India.
BWA has actively developed a self-regulatory system in the absence of comprehensive regulation. Chenoy stated, “We’ve devised token listing criteria, cybersecurity procedures, and consumer protection guidelines.” These projects address major security, compliance, and fair dealing issues.
The association has also established the ABCD Alliance (Alliance for Blockchain and Crypto Collaboration) to enhance coordination in the areas of fraud prevention, fund recovery, and user advocacy.
Chenoy said, “We are benchmarking against global self-regulatory agencies to find weaknesses in our ecosystem,” highlighting the need for such initiatives to build regulator and user trust.
Regulators worry about VDAs’ criminality, consumer protection, and economic stability, Chenoy said. He stated, “We must address concerns regarding the dollarization of the Indian economy, guarantee robust compliance mechanisms, and eliminate the use of crypto for illegitimate activities.”
He recommended a CBDC-based crypto transaction mechanism to reduce foreign currency outflows. Chenoy said CBDCs provide traceability and compliance if consumers may only invest in VDAs.
Crypto scam education for law enforcement and legislators is crucial. Chenoy said, “We are working with authorities to teach workers at all levels, including constables, who frequently lack the skills to handle such instances effectively.”
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