Indian Crypto Community Pushes for Regulatory Sandbox

Oct 12, 2020 at 17:53 UTC.In the seven months since India's top court allowed banks to legally service crypto platforms, users and trade volumes at local exchanges have increased.

So to introduce more clarity, some in the Indian crypto community are pitching a way to let platforms stay active but in a cordoned part of the market, supervised by the regulators - otherwise known as a sandbox approach.

Initiated by crypto exchange BuyUCoin, the sandbox proposes a regulatory framework to bring crypto assets under existing regulations while also setting up a supervised space for startups to develop in the sector.

India's crypto regulation has been a bit of a roller coaster.

Amid a fledgling market in 2018, the central bank, Reserve Bank of India, banned banks from servicing crypto businesses.

According to Thakral, regulations are crucial for the Indian crypto market to protect users from recurring instances of fraudulent activity.

BuyUCoin's document also notes that a missing regulatory framework keeps users from reporting legitimate crypto earnings for tax purposes and limits investor protections, discouraging money from flowing into the market.

The transaction-reporting framework proposed in the white paper also said that crypto exchanges and service providers could use the API to examine and report suspicious transactions to authorities in real-time.

Even though most crypto exchanges claim to follow KYC guidelines similar to the banks, blockchain analytics and tracing services like Chainalaysis and Elliptic have not yet gained traction.

"They are not popular among the Indian crypto industry, and also among the regulators on the other side," said Sathvik Vishwanath, CEO of UnoCoin, a crypto exchange based in Bengaluru.