Another year has gone by without India getting a firm hold over how to regulate cryptocurrencies. The divide between the government and the Reserve Bank of India persists. The RBI is concerned that cryptocurrencies pose financial risks to the country’s macroeconomic stability. The government, however, is reportedly looking at a more accommodative approach, rather than a ban on all private cryptocurrencies. We don’t know yet what’s inside the proposed Bill to regulate cryptocurrencies. But Indian crypto exchanges have revealed the questions they’re being asked by the government. Broadly, the conversation over how to regulate crypto is around these queries. Which is the best authority to regulate crypto? SEBI, RBI or even the International Financial Services Authority (IFSC) in Gujarat’s GIFT City? What are crypto-assets? How can crypto exchanges, both domestic and foreign, be registered in India? How to tax crypto transactions? How will exchanges be allowed to list new cryptocurrencies? Do cross-border cryptocurrency transactions violate Foreign Exchange Management Act (FEMA) rules? Several solutions have been proposed. Under the FEMA Act, the Liberalised Remittance Scheme or LRS allows for outward remittance worth $250,000 per Indian per year. However, there is the concern that since cryptocurrency helps users transact anonymously, it would be impossible for the government to check the quantum of intercountry cash flows. This could cause disturbance in the country’s current account deficit and forex reserves. For this, Policy 4.0, a crypto and blockchain-focused think-tank, has proposed The India Wallet. This will be a KYC-compliant wallet that will have to be integrated by all domestic and foreign crypto exchanges to offer trading services to Indian users. It would help regulators distinguish between domestic and cross-border transactions. Balaji Srinivasan, former CTO at Coinbase and angel investor also suggests that India treat crypto as ‘foreign assets’ under its FEMA rules. RBI could use FEMA to regulate crypto exchanges as ‘authorised persons’ per the Act, thereby permitting them to deal in foreign currency. Most developed countries, including Australia, Canada, Japan, South Korea, the EU and the US, have brought crypto-asset business activity within their anti-money laundering regimes. Such an approach has also been recommended by the FATF.>> Despite the regulatory uncertainty, crypto has flourished in India with more and more users turning to these new-age investment instruments, even before trying their hand at the stock market. 15-20 million crypto investors in India. Total crypto holdings worth $5.33 billion. Indian crypto exchanges such as WazirX, at 10 million, and CoinSwitch Kuber, at 11 million, have more registered users than Zerodha, the country’s largest stockbroker, at around seven million. We reached out to crypto exchange Zebpay to understand how, despite the regulatory uncertainty, the Indian crypto ecosystem has matured this year. It is important to realise that the conversation over crypto regulation isn’t limited to cryptocurrency. There’s an ecosystem of non-fungible tokens (NFTs), metaverse and Web3.0 that is leveraging blockchain technology and crypto as a mode of payment. If the Indian government takes any decision on crypto regulation, it will have to factor in these newer use-cases of blockchain and crypto as well.