India’s SEBI head wants instant settlement to counter crypto threat
The Securities and Exchange Board of India (SEBI) is set to introduce a same-day settlement cycle starting March 28, making India only the second country, following China, to adopt such a system. This move comes amidst growing competition from the cryptocurrency sector, with SEBI Chairperson Madhabi Puri Buch emphasizing the need for instant settlement and tokenization to remain competitive.
Evolving market dynamics
Buch has unveiled plans aimed at enhancing the efficiency of India's capital markets through faster settlement processes. During a recent press conference, she highlighted the significance of adapting to evolving market dynamics. Buch stated:
“If our well-regulated market cannot compete with the crypto world and cannot say we also offer you tokenization and instantaneous settlement over the medium term, I won’t even say long term, you should expect investors to move."
The SEBI chairperson articulated that we live in a time where the current generation demands instant delivery of services. It’s with that in mind Buch believes that crypto is a threat to traditional financial markets. She stated:
"Everybody wants instant everything. Right? So why should anyone believe that tomorrow if an alternative is available with instant settlement tokenization and they say the regulated market doesn’t offer it, you should expect people to move.”
With a focus on meeting investor expectations for instant transactions, SEBI aims to bridge the gap between traditional capital markets and the rapidly evolving crypto landscape.
Faster settlement cycles
India has been at the forefront of adopting faster settlement cycles, having transitioned to a one-day settlement (T+1) model between 2021 and January 2023. The optional same-day settlement, scheduled to commence later this month, represents another step towards enhancing market efficiency. However, Buch cautioned that further delays in embracing instant settlement could lead to a significant portion of the market shifting towards cryptocurrencies.
The move towards faster settlement has been met with enthusiasm from some market participants. Indian business news publication Mint reported the comments of Shauryam Gupta, CEO of web trading platform Rupeezy, on the subject. Gupta stated:
“The shift to instantaneous settlement is a substantial milestone, streamlining operations and cutting down on risk. The potential advantages of reducing counterparty risk and boosting liquidity signal positive growth for the sector.”
However, others, particularly brokers, have expressed reservations. Brokers, who hold client funds and earn interest on balances, stand to see their interest earnings decrease with shorter settlement times. Nonetheless, SEBI remains steadfast in its commitment to modernizing India's capital markets to remain globally competitive.
The regulatory landscape surrounding cryptocurrencies in India has been predominantly shaped by the nation's finance ministry and the Reserve Bank of India (RBI). While the RBI has been vocal in its opposition to cryptocurrencies, advocating for central bank digital currencies instead, SEBI's recent initiatives underscore its willingness to adapt to changing market dynamics.
SEBI's efforts reflect a broader trend of regulatory bodies worldwide seeking to strike a balance between innovation and investor protection in an increasingly digital financial landscape.
