The demand for cryptocurrencies is steadily rising in India, even as the ecosystem awaits clarity on a structured law from the central government. The bill on cryptocurrency is awaiting cabinet approval and is expected to be tabled in the next session of the Parliament.
All eyes are on how the government will define cryptocurrencies and how will gains be treated for taxation. Amid this long wait, Member of Parliament and Chairman of the Standing Committee on Finance Jayant Sinha said that it is important to take a step back and reflect on how India should participate in crypto finance going forward.
Speaking at the first edition of the Crypto Asset Conference HODL 2021 held by the Internet and Mobile Association of India (IAMAI) and the Blockchain and Crypto Assets Council (BACC), Sinha said, “Crypto assets and decentralized finance have caused regulators around the world to focus on protection for consumers. Even as global standards evolve, the Indian situation will be different.”
“Countries where currencies are open and convertible both on the current and capital accounts, it is easier for them to let standards evolve. As far as India is concerned, we have an open current account, but not a capital account,” he added referring to the capital account being administered by the Reserve Bank of India (RBI) through the Foreign Exchange Management Act (FEMA).
“That is why, what is happening in advanced economies is not easily replicable to India, because we have restrictions in how you can trade foreign currencies in India.” Sinha said.
On the way forward for the bill post the pending cabinet approval, Sinha explained, “Once the law comes to the Parliament, typically there will be a discussion in committee on that legislation. One possibility is that it can come to the Standing Committee on Finance. Alternatively, it's also possible to set up a select committee specially to look at crypto.”
Former RBI Deputy Governor on September 7 at the same conference had said that cryptocurrencies should be treated as a foreign asset once they reach citizens.
“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.
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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