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SEBI Prohibits Registered Investment Advisors From Advising On Crypto

SEBI Prohibits Registered Investment Advisors From Advising On Crypto

Investment Advisers are advised to refrain from undertaking unregulated activities, said SEBI

While investment advisors have been lately getting a significant number on queries on crypto-investments, many real estate and equity investors are now investing in crypto

Registered investment advisors are not equipped to advise on crypto, says crypto startup founders

In the latest move, India’s security and commodity market regulator the Securities and Exchange Board of India (SEBI) has barred registered investment advisors from engaging in any crypto-related services.

“Investment Advisers are, hereby, advised to refrain from undertaking such unregulated activities. Any dealing in unregulated activities by investment advisers may entail action as deemed appropriate under the SEBI Act, 1992 and regulations framed thereunder,” said SEBI in its notification dated October 21, 2021.

While SEBI has not specifically mentioned ‘crypto’ in its notification, it has referred to ‘unregulated activities’ a territory that crypto investments in India currently belongs to.

The notification has come after blockchain analysis firm Chainalysis recently reported that lots of real estate and equity investors in India are now actively engaging in crypto investments.

According to several reports, registered investment advisors have been receiving a significant portion of their daily queries on crypto-related investments.

While some of these registered investment advisors have been extending Do’s and Don’ts in crypto to their clientele, some even reportedly started advising on crypto investments.

“It has come to the notice of SEBI that some registered Investment Advisers are engaged in unregulated activity by providing platform for buying/ selling/ dealing in unregulated products including digital gold. Undertaking such unregulated activity including dealing (i.e., advisory, distribution and execution/ implementation services) in digital gold by Investment Advisers is not in accordance with the provisions of Section 12(1) of the SEBI Act, 1992 read with the SEBI (Investment Advisers) Regulations, 2013,” said SEBI.

SEBI-Registered Advisors Don’t Have Expertise On Crypto: Crypto Founders

Some of the crypto founders have welcomed the move. Nischal Shetty, founder and CEO of Binance-owned crypto exchange WazirX said that crypto is unregulated currently. It also means there are no registered or official investment advisors in crypto, and this move by SEBI emphasises that aspect. It will also ensure more clarity and transparency about the same among crypto investors.

“That being said, there are several professional crypto traders who understand the technical and fundamental analysis of this emerging alternative asset class. It’s a great opportunity for SEBI to recognise qualified traders with expertise and issue appropriate licenses. It will also encourage investors to approach registered advisors and ensure customer protection,” Shetty added.

Seconding Shetty on this, Sathvik Vishwanath, cofounder and CEO of Unocoin averred that registered investment advisors are not equipped to advise on crypto. “I think now it is good to just take a much more neutral ground. This is definitely about avoiding scams. I don’t see this as any sort of negative move towards crypto,” he said.

The draft Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 that was proposed to be tabled in parliament in Budget Session this year is supposed to regulate:

  • Central Bank Digital Currency (CBDC)
  • Crypto Assets

The bill is expected to be picked up next year during the budget session.

While CBDC falls entirely under the purview of the RBI, the SEBI has been responsible for the regulation of the commodity derivatives market in India.

If crypto gets defined as a digital commodity, as are the speculations, there are more chances that SEBI will be the institution that will have to regulate crypto.