India’s reserve bank has long since condemned the use of cryptocurrencies, but other than the Supreme Court striking down its 2018 bill last year, the Indian government’s stance on cryptocurrencies has been largely uncertain.
On one hand, top sources tracking the government’s stance say it has shifted away from the idea of a complete ban. On the other hand, more banks have started barring cryptocurrency-related businesses from accessing their services, including ICICI Bank, Paytm Payments, Yes Bank and, most recently, IDFC First Bank.
The Reserve Bank of India’s (RBI) stance is understandable. As the body responsible for ensuring the country’s ability to absorb financial shocks, it has repeatedly pointed out the risks of using cryptocurrencies. Some banks still cite the 2018 circular as the reason for freezing accounts dealing in cryptocurrencies despite the RBI having repealed it earlier this year.
According to reports, India’s market regulator, the Securities and Exchange Board of India, will oversee legislation for the cryptocurrency sector once Bitcoin (BTC) becomes classified as an asset class. Sources also suggest an expert panel is being put together to study the technology and that the parliament’s Monsoon session will discuss introducing a cryptocurrency regulation bill.
A taxing problem
India has taken drastic measures to curb the amount of cash that goes untaxed, including demonetizing its 500- and 1,000-rupee currency notes in 2016. One of the biggest concerns of the Indian government is how cryptocurrency affords a degree of anonymity to its users and how it could be used to finance terrorism, launder money and help with other forms of criminal activity. However, this raises the question of whether cryptocurrency investors should pay the price for the inefficiencies of digital law enforcement.
“Ever since the supreme court ruling in March 2020, crypto-related trading has gained immense traction in India, especially among the Millennial and Gen-Z investor community,” Sumit Gupta, CEO of India-based cryptocurrency exchanges CoinDCX, told Cointelegraph, adding, “Well-meaning regulations will help strengthen the crypto ecosystem in our country.”
In March, Minister of State Finance Anurag Singh Thakur stated that the government was collecting income tax on cryptocurrency earnings and even collected Goods and Services Tax from exchanges. However, he also noted that the government doesn’t maintain any data on cryptocurrency earnings since it has no means of capturing such information. Gupta added:
“We will continue to collaborate with other peers in the crypto industry to place our collective suggestions before authorities.”
Shivam Thakral, CEO of BuyUcoin — one of India’s top exchanges — believes the RBI will eventually come around. “I strongly believe that the RBI is not against any financial innovation, which has the potential to boost the Indian economy and create jobs for the youth,” he said, adding, “The RBI’s main concerns are around the misuse of the power crypto assets have.”
However, Sidharth Sogani, founder and CEO of cryptocurrency research firm Crebaco Global, seems much more optimistic about India’s readiness for blockchain technology. “Technologically, we are ready. Regulated environments are easy to live in, [and] will enable the government to monitor crypto transactions,” he said, adding further, “India needs a dedicated department to regulate the crypto space. Not regulating them will only encourage the black market.” Thakral added:
“I have complete faith in the RBI, and we can expect clarity on regulatory guidelines for crypto assets soon.”
The country’s approach to classifying cryptocurrencies as an asset class is positive news for the space since it matches various other countries’ routes to create better frameworks for decentralized currencies.
“Cryptocurrencies have been viewed as a digital asset by the Australian Taxation Office for some time now,” said Michael Swan, founding member and chief commercial officer of asset custody service firm Unido. He opined further, “We see the steps taken by India as a natural progression and consistent with the global sentiment.”
However, there are concerns surrounding the cryptocurrency regulation bill that is to be introduced in parliament. After the RBI’s circular in 2018, the government set up a panel to report on news pertaining to the crypto space. In 2019, this panel recommended a blanket ban on digital currencies.
Young and hungry
India’s finance minister has stated that India will