From a totally unregulated market, crypto assets are moving towards some code of conduct to build up trust and to keep crooks away. The signatories to the code of conduct are the crypto exchanges. This code will be submitted to the financial regulators and the ministry of finance.

This has become necessary on account of the surge in the price of bitcoin which was Rs.4.5 lac in March 2020 to well over Rs.31 lac in Jan 2021. It is necessary to spell out the rules of the game and compliance standards to build up investor confidence.

There should be two-step verification for customers. There are to be guidelines on KYC. Investor ID should match the bank account details. The use of cash and anonymous transactions must be monitored.

Cryptos cannot serve as security strictly speaking. Cryptos are hybrids of finance and technology.

The code would require exchanges to set up monitoring mechanism to track transactions. There should be redressal of customer complaints. There should be reporting of dubious transactions. Customers are accepted after risk assessment.

There are frauds and Ponzi like schemes offshore. Exchanges must notify the fees and charges. Exchanges or its employees must not accept any favour or gift from the customers.

A code of conduct is the self-regulatory step. Exchanges should be cautious in accepting new customers. Politically exposed persons must be identified when they invest.

An exchange may curb buying and selling of a member for a certain period. Customer fund can be segregated into hot and cold wallets.