HomeLegal & RegulationSEBI warns investment advisers on crypto activities - Zerodha's Nithin Kamath responds

SEBI warns investment advisers on crypto activities – Zerodha’s Nithin Kamath responds

The Securities and Exchange Board of India (SEBI) has issued a warning that registered investment advisers are not allowed to engage in unregulated products including the sale of digital gold. Although not specifically named, this warning is also directed towards crypto activities, sale of shares in unlisted companies.

In August, National Stock Exchange has directed its members, including stockbrokers, to discontinue the sale of digital gold on their platforms by September 10.

It has come to the notice of SEBI that some registered investment advisers [RIAs] are engaged in unregulated activity by providing platform for buying/ selling/ dealing in unregulated products including digital gold,” SEBI explained.

The securities market regulator warned that “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.”

Responding on Twitter, Nithin Kamath, Co-founder, and CEO of online brokerage firm Zerodha said, “When you are regulated, everything is normally black & white. People keep asking me why don’t we offer crypto, unlisted private companies, US stocks, digital gold — which we anyways didn’t sell because it’s not the best way to buy gold, and more.”

The current security regulations restrict members from engaging, either as principal or employee, in any business other than that of securities or commodity derivatives, except as a broker or agent, not involving any personal financial liability.

In July, Finance Minister Nirmala Sitharaman confirmed that the crypto bill was ready for the Cabinet. In September, Jayant Sinha, a lawmaker from the ruling BJP and former junior finance minister, said that the crypto legislation will take into consideration the security angle.

The Reserve Bank of India (RBI) is working on central bank digital currency but continued to have “serious concerns” regarding cryptocurrencies. The RBI digital currency will be launched in phases later this year.


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