India's securities regulator wants promoters to sell crypto before IPO: report

India's top securities regulator reportedly wants promoters of companies looking to go public to sell their cryptocurrency holdings before raising money.

The Economic Times reported the news on Monday, citing "several people with direct knowledge of the matter." The Securities and Exchange Board of India (SEBI) has reportedly informed merchant bankers, securities lawyers, and company executives involved with the IPO process about the restrictions.

No written communication has been formally provided by SEBI, per the report. The Block has reached out to the regulator for comments and will update this story should we hear back.

The restrictions reportedly stem from the possibility that India will ban cryptocurrencies. "There could be a direction from the government in this regard," a securities lawyer currently working on some IPOs told ET. SEBI seems to think that "this could become a risk for investors if a promoter holds an asset that is illegal in the country."

SEBI is being "over cautious here and it appears like a case of overreach," according to Vatsal Gaur, a partner at law firm Pier Counsel. "If a promoter holds any cryptocurrency, it may not necessarily expose the company to any risk — the same way as holding any other financial assets doesn't pose a risk to the operations of a listed entity," Gaur told ET.

India is said to be moving to ban the use of "private cryptocurrencies" via a new bill, which is also expected to provide a framework for the digital rupee, the official digital currency to be issued by the Reserve Bank of India.