SEBI asks mutual funds not to invest in crypto until regulatory clarity

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SEBI chairman Ajay Tyagi said until there is clarity in policy from the government, it would not be ideal to invest in crypto

India’s market regulator SEBI has advised domestic mutual funds to defer investing in crypto assets until there is a clarity on its regulatory framework. In a press conference Tuesday, Securities and Exchange Board of India chairman Ajay Tyagi said that the regulator believes until there is clarity in policy from the government, it would not be ideal to invest in crypto asset related companies.

SEBI chairman’s statement comes as the government is considering to discuss legislation for cryptocurrency. The government was expected to table the bill in the winter session of Parliament, which concluded last week, but it did not happen. The next session is expected to start in February.

Tyagi also referred to one company’s earlier plans to launch a blockchain mutual fund, ostensibly referring to Invesco. In November, Invesco paused its plan to launch Invesco CoinShares Global Blockchain ETF Fund due to uncertainty around cryptocurrency policy in the country.

Tyagi said if domestic mutual funds seek NFO (new fund offer) permission from the regulator, it would advise against investing in crypto until there is a law around digital assets.

Separately, RBI weighed-in on initially introducing Central Bank Digital Currency (CBDC) in a basic form and test comprehensively. “Given its dynamic impact on macroeconomic policy making, it is necessary to adopt basic models initially, and test comprehensively so that they have minimal impact on monetary policy and the banking system,” the central bank said Tuesday in its report on India’s banking sector.

Even though there are no laws that prohibit cryptocurrency trading, it does not come under regulatory purview in India. Through the highly anticipated ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’, the government aims to create a framework for creation of official digital currency to be issued by RBI. The Bill also allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses in the private sector.

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