New Delhi: Emerging technology think tank, Policy 4.0, has suggested a wallet-based solution for India to tackle the spectrum of regulatory risks the government faces with cryptocurrencies. The report recommends that India should create its own “India Wallet” to address customer-to-your-customer (KYC), inflow and outflow of cryptocurrency, and monetary concerns.
Government and industry experts recently chatted on the way forward on cryptocurrencies in India. The Center is reportedly looking at regulating crypto as a commodity instead of a currency.
As of the Policy 4.0 report, for the time being, the default characterization of tokens as ‘commodities’ can serve as a starting point even though, according to the think tank, it does not adequately capture the true nature of the token. could.
Policy 4.0’s advisory board includes Ashima Goyal, a member of the monetary policy committee of the Reserve Bank of India (RBI) and founder of Finsec Law Advisors and Sandeep Parekh, a former regulator of the Securities and Exchange Board of India (SEBI).
The think tank suggested in its report that the first phase of regulation could focus on the management of public and private keys, which have the potential to cover the full spectrum of crypto activity in India.
The second phase, according to the report, may take a more gradual approach in defining the specific nature of tokens in terms of their specific use cases.
While the public key is used for identification, a private key enables ownership and use. Furthermore, cryptocurrency wallets store public-private key pairs for various crypto assets and help users to transact in cryptocurrency.
Policy 4.0 states that the first regulatory focus should be on wallets and the onus should be on citizens to get verified wallets. “Any crypto industry players will then have to onboard verified wallets on their platform,” it added.
According to the think tank, “India Wallet” can be used to monitor all crypto activities such as trading, decentralized finance, and store tokens, collectibles and coins. Plus, it can integrate with crypto exchanges as well as non-fungible token (NFT) marketplaces and can differentiate between domestic and cross-border transfers.
“One-time KYC verification will be required for each citizen at the time of establishment of the crypto wallet. In countries without digital identity, a framework of verifiable credential providers may be considered for such KYC verification. In the case of India, UIDAI or DigiLocker is able to provide such KYC verification,” recommends Policy 4.0.
According to the think tank, the wallet could be a new infrastructure created by the government or it could also be a technical standard according to which private players build or modify existing wallets.
“These will not be recognized under Indian law. Any crypto assets that are managed through citizens’ wallets will be recognized and legally protected under the law. Other activities can be treated as black money and treated as such.”
In order to ensure financial stability, as per Policy 4.0, a limit may be imposed on wallets on the amount of investments by citizens in cryptocurrencies. “Such caps can be managed flexibly and imposed only when sustainability risks are considered acute. They can also be increased or decreased based on criteria defined by the government.”
The think tank recommended that India Wallet may also send alerts to citizens and the government if the annual limit set by the regulators is breached or is likely to be breached.
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