Context:
- The rising popularity of crypto currencies and the increasing number of entities looking at raising funds through Initial Coin Offerings (ICO).
- The trend has caught the attention of the capital market regulator, which is evaluating whether such instruments and offerings can be brought under its regulatory purview.
In news:
- The Securities and Exchange Board of India (SEBI) is mulling whether an ICO can be regulated under the existing legal framework or certain amendments would be required in case the government wants the capital market watchdog to be the regulatory authority for such issuances.
Who should regulate?
- Incidentally, crypto currencies like bitcoin, ethereum and such offerings have been under government radar for long.
- Discussions have been held between various bodies, including SEBI and the Reserve Bank of India (RBI), on the possible ways in which this segment can be regulated.
- The central bank is of the view that these instruments are securities and so SEBI should be the regulating body.
About ICO:
- An ICO, like an equity initial public offer (IPO), is an issuance of digital tokens that can be converted into crypto currencies and are mostly used to raise funds by start-up firms dealing in blockchain technology and virtual currencies like bitcoins and ethereum.
- Unlike an IPO, which is governed by SEBI regulations, there is no regulatory body for ICOs in India.
Key Points:
- According to data from UK-based CoinDesk, nearly $2.7 billion has been raised globally through ICOs since 2014.
- “Bitcoins are neither ‘commodities derivatives’ nor ‘securities’ under Securities Contracts (Regulation) Act, 1956.
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