Cryptos Set To Be Regulated In GIFT City Next Year, Country Likely To Follow Suit — Profit Exclusive

A regulatory framework for cryptocurrency exchanges and entities involved in tokenisation is set to be introduced in India's GIFT City in 2025, according to two people in the know. The regulations are expected to be finalised following the release of a report by the International Financial Services Centres Authority (IFSCA) Asset Tokenisation Committee, which is slated for submission in the coming year.

According to the people quoted above, at first, IFSCA is going to be the regulatory authority for the crypto exchanges in GIFT City. However, it is expected that the model would be followed all over India eventually, with domestic regulators stepping in.

It is also likely that just as equities or debentures are mentioned in the definition of securities under the Securities Contracts (Regulation) Act, tokenised assets or cryptos could eventually be added to this definition for domestic regulations.

The IFSCA, which oversees GIFT City, had formed the tokenisation committee last year to explore the regulatory landscape for cryptocurrency and related sectors. The idea was to have a framework on entities that work on tokenisation as a technology, rather than just cryptos.

The committee's report will provide the basis on which the final regulations for crypto exchanges, tokenisation projects, and other such fintech activities are likely to be brought in.

As per the IFSCA legal landscape, the metaverse, Web3, and blockchain are considered to be techfin, and hence there could be some common ground on their regulations.

Several projects are already operating within the IFSCA's sandbox, including tokenisation of real estate, fund units, and bonds, according to the people quoted above. Once the committee's recommendations are made public, it is expected that more entities will enter the regulatory fold and seek to operate under the new framework, they said.

The inclusion of technologies such as blockchain and distributed ledger technology by the IFSCA positions crypto exchanges as a potential part of the broader fintech ecosystem in GIFT City.

However, in a media statement issued by the IFSCA on Wednesday, it was mentioned that there is no such move on its part to regulate crypto exchanges, cryptocurrencies, or allied virtual assets in the IFSC.

The final regulations will likely pave the way for more traction from entities keen to enter this emerging regulatory landscape.

Presently, India does not have any clear regulatory framework for crypto exchanges or other tokenisation projects. The Reserve Bank of India has consistently maintained an adverse opinion of cryptocurrencies, with former Governor Shaktikanta Das comparing them to the tulip rush.