Introduction
A new framework aimed at addressing regulatory confusion surrounding digital assets in India has been put forward by the Web3 investment firm Hashed Emergent in collaboration with the policy advisory organization Black Dot. Announced on Monday, the proposed legislative structure known as the Crypto-systems Oversight, Innovation and Strategy (COINS) Act serves as a guideline for a more defined, industry-driven approach to cryptocurrency regulation in the country.
Key Features of the COINS Act
Although the COINS Act is non-legally binding and carries no official weight until it is debated and approved by parliament, it provides valuable insight for lawmakers into crucial issues related to digital rights in the cryptocurrency space, such as self-custody, access to protocols, and financial privacy. The initiative responds to significant regulatory challenges faced in India, including challenging tax implementations, ambiguous regulations, and the lack of a specified authority overseeing crypto activities.
One of the primary recommendations of the COINS Act is the establishment of a new governing body known as the Crypto Assets Regulatory Authority (CARA) to supervise all crypto-related activities in India. Furthermore, this model law incorporates key international regulatory standards from initiatives like the European Union’s Markets in Crypto-Assets Regulation (MiCA) and Singapore’s regulatory sandbox, while adapting them to fit India’s legal and market landscape.
Regulatory Challenges and Solutions
Arvind Alexander, a legal counsel from Hashed Emergent who was integral in drafting the COINS Act, highlighted that ongoing regulatory uncertainty was a significant driving force behind its creation. He pointed out the frustration among developers and users, who currently lack explicit legal protections concerning self-custody and privacy while having to navigate an excessive tax environment alongside vague Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. India currently imposes a flat rate of 30% tax on profits from trading virtual digital assets (VDAs) and a 1% tax deducted at source on transactions exceeding $115, which can be borne by either the buyer or seller.
The COINS Act reimagines the policy landscape by emphasizing fundamental rights as extensions of constitutional law within India, thus securing them against potential infringement. This model introduces an alternative regulatory framework where centralized exchanges are required to attain comprehensive licenses, while non-custodial services will adhere to simpler disclosure regulations. Truly decentralized protocols, on the other hand, would be completely relieved from compliance duties.
Impact on the Crypto Landscape
The model law also addresses the concerning trend of Indian decentralized finance (DeFi) firms and other crypto enterprises relocating overseas due to the unfavorable regulatory climate. Vishal Achanta, another contributing legal advisor at Hashed Emergent, stated that the COINS Act intends to actively reverse this trend and position India as a favorable destination for crypto innovation, rather than a complicated regulatory landscape. This goal aims to provide clearer rights and assured pathways for innovation through structured oversight.
Moreover, the COINS Act advocates for the establishment of a national Bitcoin reserve, envisioned as a fund created from legally confiscated cryptocurrencies and bolstered by strategic market purchases. This proposal aligns with suggestions from a prominent Indian politician, who called for a Bitcoin reserve pilot scheme to enhance the nation’s economic stability.
Community Engagement and Future Steps
In promoting the adoption of the COINS Act, Hashed Emergent is set to facilitate a gathering with the Bharat Web3 Association to navigate comparisons between the new model and forthcoming regulation proposals along with a discussion paper from the Department of Economic Affairs (DEA). Concurrently, Black Dot will organize workshops with key financial authorities, including the Ministry of Finance and the Reserve Bank of India, to engage in dialogue about the framework.
Emphasizing community collaboration as a driving force, Alexander believes that collective effort, inspired by the ethos of the Bitcoin white paper, will be essential in advancing the model law towards legislative success. His sentiment reflects an earlier statement from crypto proponent Sujal Jethwani, who suggested that grassroots pressure from crypto users could eventually lead to the adoption of more favorable public policies.
