Indian regulators continue to make moves that hamper the growth of cryptocurrencies in the seventh largest nation in the world. The nation’s securities regulator is now looking to force promoters of initial public offerings to liquidate their cryptocurrency holding before participating in raising funds.
According to a report from local news publisher the Economic Times, the Securities Board of India may bar IPO promoters from raising funds if they hold cryptocurrencies. The move is said to in compliance with SEBI’s instructions to securities lawyers, merchant banks, and other stakeholders in the IPO ecosystem regarding cryptocurrencies.
The report quotes a securities lawyer, stating “there could be a direction from the government in this regard. The market regulator seems to think that this could become a risk for investors if a promoter holds an asset that is illegal in the country.”
Meanwhile, Mahesh Singhi from investment banking firm Singhi Advisors claims SEBI is trying to avoid the scenario where IPO promoters divert funds raised from public sales to crypto investments. The concerns of these regulators are justified considering the number of scams that have unfolded over the past few years.
As of now, IPO promoters have figured out a temporary solution to continue holding their crypto funds. An affidavit stating that IPO promoters will sell their crypto funds in 24 hours if the rumored ban on cryptocurrencies comes into effect in India.
The crypto industry in India has always suffered because of the regulatory tension around it. Despite the nation’s supreme court overturning an earlier shadowban on cryptocurrencies imposed by the Reserve Bank of India (RBI), the nation’s central bank, fresh rumors have surfaced, claiming that this time the regulators are taking a faster and stricter approach to dismiss digital currencies.
A grave mistake?
Earlier this month, former Coinbase chief technology officer Balaji Srinivasan said a ban on cryptocurrencies in India would be equivalent to banning the “financial internet.” He claims it would make India “20% poorer from what it could have achieved over the five-year term.”
As previously reported by The Daily Chain, an anonymous source claiming to be a senior Indian Finance Ministry official reported that the ban is likely to occur and the regulators have decided to give a three-to-six month period for investors to liquidate funds.
The bill dubbed Cryptocurrency and Regulation of Official Digital Currency was introduced in the Lok Sabha bulletin in January. The bill looks to “prohibit all private cryptocurrencies”, while also allowing for “certain exceptions to promote the underlying technology of cryptocurrency and its uses.”