India’s markets regulator, the Securities and Exchange Board of India (SEBI), is reportedly asking promoters looking to raise funds for their companies through an Initial Public Offering (IPO) to sell their crypto assets before raising funds.
According to ET, which first reported the development, SEBI has informally told merchant bankers, securities lawyers and company executives that holding crypto assets could spell trouble for promoters of companies that are going through the IPO process, since the Indian government may soon ban cryptocurrencies.
SEBI’s concern seems to be that funds raised through IPOs should not be used for buying crypto assets, which may soon be banned in the country.
The Indian government is looking to pass the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 during the ongoing budget session of Parliament. Although, media reports have suggested that the government may delay the bill till after the ongoing session concludes, and bring it in as an ordinance.
The synopsis of the bill reads: “To create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India. The bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
Recent source-based media reports have suggested that through the bill, the government will ban all private cryptocurrencies i.e. those that are not state-issued but give investors a three-to-six-months transition period to be able to sell their crypto assets.
The speculations about the bill have sent India’s cryptocurrency exchanges in a tizzy. Several of them have kicked up lobbying efforts to convince the government about the need to regulate and not ban cryptocurrencies.
Many experts seem puzzled by the government’s apparent intention to ban crypto, as they feel that its agencies could earn a sizable amount in GST and tax by regulating the sector. This assertion forms the focal point of a Khaitan and Co and Crebaco Global representation, sent to the government this month, urging it to bring in regulation for the sector.
“We have argued in our representation that the government could earn GST on crypto transactions and income tax on crypto gains. This could be done by bringing crypto exchanges under the purview of the Securities and Exchange Board of India (SEBI). Moreover, our case was never to treat crypto as a form of currency. We need to treat cryptocurrencies as assets, which has been the industry’s position all along,” Rashmi Deshpande, partner at Khaitan and Co told Inc42 about her law firm’s representation to the government.
According to some estimates, nearly 7 Mn Indians hold $1 Bn-worth of crypto assets.
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