Experts call for crypto with proper regulation
NEW DELHI: Experts and key bodies have favoured a tightly controlled cryptocurrency regime in India over a blanket ban on the alternative payment ecosystem that will have strict transaction protocol and also imposition of taxes to help the government generate revenue.
A note prepared by CII for Indian parliamentarians maintained that a “balanced and thoughtful regulatory approach to crypto/digital tokens needs to be evolved in India.”
The industry body argued that “regulatory tool box should accept, not reject and outlaw, the new world of crypto/digital tokens.”
Similarly, IIM Ahmedabad’s public policy alumni special interest group suggested to lawmakers that “Cryptocurrencies should be regulated, not banned”. Their presentation argued, that “regulation helps highlight and address issues or gaps, banning will push it underground.”
There is no explicit legalisation of cryptocurrencies in India but a verdict of the Supreme Court (in the Internet and Mobile Association of India V. Reserve Bank of India case) declared an outright ban on cryptocurrencies but raised the possibility of RBI’s jurisdiction for all forms of virtual currencies.
The ban had come into force in 2018.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, building on a previous version of the bill, initially aimed to ban private cryptocurrency operators, and simultaneously empower the RBI to issue what is known as central bank digital currencies (CBDC), which in India’s case is likely to be Digital Rupees. The IIM body suggested that the CBDC “should be pegged 1:1 to INR making it India’s stablecoin.”
It also pitched for registration of “all industry exchanges” and that “SEBI could be a natural regulator if crypto is treated as an asset, not currency.” It maintained crypto offerings can take place in the line of IPO and all “inflow/outflow to happen via formal banking channels.”
Krishna V Iyer, a researcher in blockchain, told lawmakers to prescribe minimum networth/ investment threshold and consider GST on every transaction. He also suggested additional taxes such as capital gains or miscellaneous income tax.
CII too echoed a similar idea and said, “Treat crypto/digital tokens as ‘securities’ of a special class” in income tax law and GST law. It suggested that crypto/digital tokens can be treated as ‘capital assets’ for income tax purposes.
Software body Isprit pointed out that with widespread telecom adoption, real-time payments system, and massive vaccine drive, India has the potential to be the fastest to scale up.
“Crypto technology-powered Decentralised Digital Assets hold a market cap of over $3 Trillion. The future promise of digital assets has attracted lots of retail attention, but institutional investors too.
:Some of the world’s most visionary innovators and investors have thrown their hats in the ring to build upon this technology. Finding a viable way to participate in this new economy is almost essential for India,” it said.
According to lawmakers familiar with the matter, a parliamentary panel will be exploring the issue further as it deliberates the impact and consequences of regulating cryptocurrency.
“There is a lack of conceptual clarity among the members on what all cryptocurrency or crypto-assets entail,” a person familiar with the matter said. “There are fundamental questions that still need to be answered before the currency, which is barely a line of code, can be regulated.”
A second person said that the standing committee will be tabling a report on the issue. “The committee hasn’t even heard from the government yet,” the person said.
“Even the stakeholders could not explain what will happen in a situation where the currency is misused, or abused, or used to cheat people.”
The first person added that while the stakeholders batted for the adoption of crypto, currency remains a sovereign domain. “It is held, managed and distributed in a centralised manner. (But) take for instance Bitcoin, one doesn’t even know where it originated from.