In recent times, the focus has shifted from fiat currency to a new-age digital currency termed as “cryptocurrency.” The volume and use of cryptocurrency trading have exploded, especially during the wake of the pandemic, as there is a growing demand for a digital platform to transact securely, anonymously, and without government interference. This is evident from the fact that the global cryptocurrency market is expected to grow at a compound rate of 32% from 2019 to 2024.
What’s the stand of the government on cryptocurrency regulation?
After dallying over legalising or banning cryptocurrencies, the Indian government has taken a step forward towards regulating digital currencies in India. The Ministry of Corporate Affairs (MCA) has made it obligatory for the companies to disclose crypto trading and investments during the financial year. Experts see it as an excellent initiative and expect the taxation rules to follow through. This is being considered as the primary step towards cryptocurrency regulation in India.
The accounting of crypto assets is aimed at curbing illegal activities and circulation of black money via cryptos. It can also improve corporate governance with more transparent disclosures. The Centre has now assured crypto stakeholders that there won’t be a blanket ban on digital currencies, but it’s still formulating its full opinion on the matter. Nirmala Sitharaman has declared that the Centre was open to experimentation with new technologies and is not closing its minds for them.
Is crypto legal in India?
Cryptocurrencies are not illegal in India. So if you want to buy, go ahead and start trading in it. However, India does not have a regulatory framework to govern cryptocurrencies as of now. The government had constituted an Inter-Ministerial Committee (IMC) on November 2, 2017, to study more about virtual currencies. The Group’s report, along with a Draft Bill, flagged the positive aspect of distributed-ledger technology and suggested various applications, especially in financial services, for its use in India, including banks and other financial firms.
However, the Centre had earlier flagged reservations around its misuse and wanted to put a blanket ban in India. But, according to the latest reports, cryptocurrency may not face a complete ban in India. The Centre may soon set up a panel to regulate them. This decision was taken after several cryptocurrency exchanges urged the Centre to regulate virtual coins rather than banning them.
Is cryptocurrency taxable currently?
Yes, cryptocurrency transactions are taxable in India when the person earning such gains is an Indian tax resident or where the crypto is said to be domiciled in India.
Is the government working on digital currency?
While the government has some reservations on cryptocurrencies, it is also working on its digital currency. The government does not want to be left behind in the new-age tech revolution and aims to cash in on the benefits blockchain technology offers. “The time has come to leverage its applications while at the same time strengthening the digital infrastructure,” Reserve Bank of India (RBI) Governor Shaktikanta Das had declared in February while announcing that RBI is working on its digital currency.
The way forward
One of the country’s largest public sector banks, along with 28 other commercial banks, is testing blockchain technology under the name ‘BankChain’ for achieving an integrated corporate e-KYC (electronic know your customer) platform, a blockchain-powered register, and a vendor rating system, which records lien, hypothecation, mortgages and pledges on movable, immovable and tangible assets.
The government of India is focussing on making use of its benefits and the underlying technology. For regulating this area, a risk-based framework (which may inter alia address issues pertaining to acceptance as data storage, legal tender, tax, security contracts, financial markets, and privacy, etc.) shall be developed after taking views from stakeholders and market participants. For practical reasons, this framework may be implemented in phases. If it becomes a reality, cryptocurrency will have a bright future in India and will continue to evolve over the upcoming years.