Crypto Corporate Frauds And Regulatory Arbitrage: An Indian Legal Perspective
- IJLLR Journal
- 7 days ago
- 2 min read
Pradyumna Krishna H.G, School of Law, Christ (Deemed to be University), Bengaluru
ABSTRACT
Cryptocurrencies and blockchain-based enterprises have been exponentially expanding in India, far beyond the evolution of relevant legal and regulatory systems. This regulatory lag has rendered the industry a perfect incubation centre of crypto corporate frauds like Ponzi scheme, token effects and financial reporting. Meanwhile, crypto companies have exploited the regulatory arbitrage and transferred the business to other jurisdictions with reduced control in an attempt to escape the regulatory and enforcement process. The fragmented regulatory framework in India where jurisdiction boundaries are cut across the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Enforcement Directorate (ED) has contributed to the further complexity of the enforcement and compliance problem. This study uses doctrinal methodology, therefore discusses the existing legal framework in India in dealing with the corporate fraud of crypto and regulatory arbitrage. Based on the recent policy documents, case laws and international models, it discusses the typology of frauds existing in the crypto ecosystem in India and the modus operandi through which the regulatory arbitrage is carried out. The paper also analyses the implications of the Draft Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, and its implications for innovation and the protection of investors. The researcher, through a comparative lens, analyses regulatory responses from jurisdictions like United States, European Union and Singapore, bringing out best practices which can be relied upon for informing India's evolving crypto policy. The literature review brings together findings from academic articles and policy papers, and indicates an overall lack of coordinated enforcement and lack of clarity in the legislation. While there have been existing studies that have discussed the risks of crypto fraud and the need for regulation, there is little that discusses the intersection of fraud and arbitrage within the Indian context. This paper suggests that there is a requirement of multi-tiered regulatory approach encompassing harmonised legislation, inter-agency coordination, integration of RegTech and international cooperation. It contends that India needs to adopt a dynamic and technology-neutral framework that balances innovation and accountability that ensures protection of investors and integrity of markets in the digital asset space.
Keywords: Cryptocurrency regulations, corporate fraud, regulatory arbitrage, India, RBI, SEBI, blockchain law, investor protection, AML compliance, digital assets.
