India’s market watchdog warns mutual funds to stay away from crypto assets at least until regulations come in

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  • The Securities and Exchange Board of India (SEBI) has warned mutual funds to hold off from launching any crypto-centred offerings until regulations come in.
  • India’s cryptocurrency bill was supposed to be discussed during the previous session of Parliament earlier this month, but did not make it to the table.
  • Invesco Mutual Fund has already delayed the launch of its crypto-based exchange-traded fund (ETF) and Navi Mutual Fund’s application is still pending approval from SEBI.

India’s market watchdog, the Securities and Exchange Board of India (SEBI), wants mutual funds to wait it out before coming up with new fund offers (NFOs) based on crypto assets.

According to SEBI Chairman Ajay Tyagi, mutual funds should not be making such investments until there’s a law in place to regulate the industry.

And, as things stand, India’s Cryptocurrency and Regulation of Official Digital Currency Bill (2021) is still pending approval from the Cabinet — the highest decision making authority in the country led by the Prime Minister, Narendra Modi.

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“It is prudent for regulated entities with public markets exposure or focus, or any form of public solicitation, to wait for additional clarity regarding the legality or definition of digital assets as assets or securities or commodities in India,” Nitin Sharma, partner at Antler India and blockchain lead for Antler Global, told Business Insider.

Caught in limbo

The warning from SEBI comes after asset management company Invesco Mutual Fund delayed the launch of its blockchain fund — the first of its kind in India — due to legislative uncertainty, even though they already have the green stamp from SEBI.

“A lot of HNIs, family offices and retail investors will be drawn to such options because they are more comfortable with indirect exposure right now, even at a cost, versus dealing directly with digital assets,” said Sharma.

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Invesco isn’t the only mutual fund in India wanting to dip its two in the crypto space. Earlier this month, Navi Mutual Fund also filed a draft with SEBI for a Blockchain Index Fund of Funds (FoF), which will track the IndxxBlockchain Index.

The IndxxBlockchain Index, however, index doesn’t track crypto assets directly. Instead, it tracks mainstream companies like Nvidia, Advanced Micro Devices and others that have some crypto activity. The index also includes Indian IT giants like Infosys, Wipro, and TCS.

“As and when this space matures, we can definitely expect multiple mutual fund houses coming up with Blockchain specific funds. These funds do not necessarily need to have direct exposure in crypto,” Edul Patel, the CEO and co-founder of Mudrex, told Business Insider.

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