Context:
Ahead of Union Budget 2026–27, the Ministry of Finance is in discussions with the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) to put in place a formal regulatory framework for crypto exchanges in India.
Proposed Regulatory Architecture
1. SEBI as the Primary Regulator
- All Indian crypto exchanges to be mandatorily registered with SEBI
- SEBI to oversee:
- Trading platforms
- Disclosure norms
- Market conduct
- Investor protection
Addresses the long-standing gap of no single market regulator for crypto assets.
2. RBI’s Role
- Oversight of:
- Foreign Direct Investment (FDI) in crypto entities
- Cross-border transactions
- Capital flow risks
Reflects RBI’s mandate over external sector stability and monetary sovereignty.
Why Is This Needed?
Fragmented Oversight at Present
Currently, crypto regulation is spread across agencies:
- Tax authorities → taxation of Virtual Digital Assets (VDAs)
- Financial Intelligence Unit – India (FIU-IND) → anti-money laundering compliance
- Enforcement agencies → illicit flows and violations
Policymakers view this fragmentation as a major enforcement and monitoring weakness.
What are Crypto Exchanges?
Crypto exchanges are digital platforms where users can buy, sell, trade, or hold cryptocurrencies (e.g., Bitcoin, Ether). They act as marketplaces, matching buyers and sellers, and often provide wallets, custody, and analytics.
Types of Crypto Exchanges
- Centralised Exchanges (CEXs)
- Operated by a company; require KYC/AML
- Higher liquidity; custodial risk
- Decentralised Exchanges (DEXs)
- Peer-to-peer via smart contracts; non-custodial
- Lower counterparty risk; higher tech risk
- Hybrid Exchanges
- Mix of custodial control and on-chain settlement
Objectives of the Proposed Framework
- Investor protection through regulated exchanges
- Market integrity and transparency
- Tax compliance and traceability of transactions
- Curbing illicit financial flows, money laundering, and terror financing
- Creating a regulated crypto ecosystem rather than banning innovation
