Former Reserve Bank of India (RBI) Deputy Governor R Gandhi is of the view that cryptocurrencies should be treated as a foreign asset once they reach citizens. Speaking at the first edition of the Crypto Asset Conference HODL 2021, Gandhi said that it should be possible to track crypto transactions through a central repository.
“Cryptocurrencies should be paid for through normal payment channels. If they are not, then it should be deemed as mined and capital gains tax must be levied. That is like voluntary disclosure. The transactions should be fully tracked through a repository,” Gandhi said.
He argued that it has been accepted that cryptocurrencies cannot be accepted as currency and is not a payment instrument as it does not fulfill the fundamental requirement of being legal tender issued by any central body.
"But while it is important for any government to grant its citizens the freedom to trade in cryptocurrencies, the ecosystem must comply with the laws of the land," Gandhi explained.
He said, “The very idea of crypto was that it should be anonymous, independent, and it cannot be tracked. But every society will have rules that expect compliance from all members and it will penalize non-compliance. A state will always want to give freedom to its citizens in terms of economic transactions. It enforces contractual obligations, taxes income and gains. So, any economic activity should be amenable to these kinds of things.”
Sumit Gupta, Co-founder and CEO of cryptocurrency exchange CoinDCX stressed how regulators should not look at clamping down the technology as it evolves, usually faster than the time taken to frame laws around it.
“I think our approach should be to let innovation take its course when the technology is in its nascent phase. And to define the boundary conditions which are of concern to regulators. Such an environment will give an opportunity for the ecosystem, industry players and participants to grow,” he said.
He added that the industry is willing to work with the government and regulators to ensure that Indians can continue to benefit from cryptocurrencies.
“Exchanges are open to engaging on working on legal frameworks and tax laws. Globally there are frameworks, the industry has been regulated. If they can do it then why not India?” he asked.
Gupta added that in his view the solution is to create a robust and flexible regulatory framework that will allow innovation to thrive while addressing the concerns of the government.
This first-of-its-kind conference comes at a time when the crypto verse is awaiting the cryptocurrency bill that is likely to be tabled in the upcoming Parliament session. Recent reports suggested that the government might define cryptocurrency in the bill and will be treated as an asset class so that returns can be taxed in the appropriate manner.
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