Public information suggests that the Enforcement Directorate, India’s primary economic law enforcement and intelligence agency, has begun inquiring whether cross-border crypto- asset activity would violate the Foreign Exchange Management Act, 1999 (FEMA), India’s capital controls legislation. International financial and monetary organizations such as the International Monetary Fund too have called on nations to amend their capital control laws to meet the challenges raised by the sale and purchase of crypto-assets. Empirical assessment of the matter, however, suggests that the link between crypto-assets and capital control evasion is overstated. In this context, the current paper seeks to assess whether crypto-assets can be accommodated within India’s foreign exchange framework. It also suggests ways to regulate the cross-border flow of crypto-assets without hampering the development of the Web3 economy in India.
Attribution: Meghna Bal and Mohit Chawdhry. Perspectives on the Intersection of the Foreign Exchange Management Act, 1999 and the Indian Crypto-Market. May 2022, Esya Centre and IAMAI.
This report is part of a series published jointly with the Internet and Mobile Association of India (IAMAI) that seeks to inform the public on the different policy dimensions of crypto-assets in India and the implications of regulatory decision-making on Web 3.0, blockchain, crypto-assets, non-fungible tokens and the metaverse. With this series, we aim to create a credible and trusted knowledge repository on the Indian crypto-market..