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Despite negative news flow in the global crypto space, Indian investors are still chasing better returns from “earn” features on their exchanges.

Popularly known as “yield farming,” the method sees investors deposit their crypto assets into a pool, which is then used by exchanges to further engage in risky ventures. Thanks to these risky companies, investors earn between 6 and 12% in return.

But what investors might miss is that unlike formal financial products where a regulatory infrastructure protects them, crypto exchanges in India are not regulated by any authority, which significantly increases their risk, experts said.

The story is different in other geographic areas. Last week, the U.S. Securities and Exchange Commission accused crypto exchange Gemini and crypto lender Genesis of “unregistered offering and selling of securities to U.S. retail investors” related to the earning scheme. of Gemini managed in partnership with Genesis.

In the recent past, international crypto lenders, such as Celsius and Vauld, which offered similar products, both went bankrupt and have yet to return funds deposited by customers.

In India, however, crypto rules have yet to arrive and existing securities laws do not apply as the asset class has yet to be officially classified by the government. Even though earning programs are “akin to deposits, [crypto] is not a recognized currency,” R Gandhi, former deputy governor of the Reserve Bank of India, told BQ Prime.

This takes them beyond the jurisdiction of the RBI and since the Securities and Exchange Board of India has not recognized these assets as securities, they do not regulate them either. Consequently, crypto activity in India is “collapsed between the stools”, Gandhi said.

The RBI and SEBI did not respond to requests for comment on the story.

The lack of rules, however, hasn’t stopped users from jumping in to seek feedback. For Indian crypto exchanges BitBns, Unocoin, and CoinDCX, users of their “earn” features make up around 18%, 20%, and 25% of their overall user base, respectively, according to the exchanges.

“I would definitely agree that this will eventually fall under SEBI’s purview,” said Sharat Chandra, co-founder of the India Blockchain Forum.

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