As discussed, cryptocurrencies are not currencies, or financial assets or real assets or even digital assets. Therefore, it cannot be regulated by any financial sector regulator. It is not possible to regulate something that one cannot define. 36. Cryptocurrencies are typically global products whose defining characteristic is that they are outside official control and they cannot be regulated by country-specific regulators.
The Financial Stability Institute of the Bank for International Settlements identifies difficulties in regulating cryptos – such as the international nature of crypto transactions, absence of technological solutions to ensuring FATF’s ‘Travel Rule’, the problem of ‘unhosted wallets’, the fact that P2P transactions do not involve any entity subject to AML-CFT regulations, etc. Let us suppose India decides to regulate cryptocurrencies.