In a clear indication that the Center is about to formulate a long-term digital currency strategy, Prime Minister Narendra Modi chaired a comprehensive meeting on the way forward for cryptocurrencies and related topics on Saturday.
Leading sources after the meeting said that the first regulatory measures the government could initiate after the prime minister's review would be against two shortcomings that accompany the popularity of cryptocurrencies: excessive promises and a lack of transparency. This would imply putting a legal brake on misleading and non-transparent advertising.
The sources said that unregulated cryptocurrency markets cannot be allowed to become avenues for money laundering and terrorist financing.
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Prime Minister Modi held the review meeting after a long process of consultations between the Ministry of Finance and the Ministry of the Interior together with the Reserve Bank of India (RBI). The exercise involved extensive consultations with experts from around the country and the world. Global examples and best practices were also reviewed.
After the meeting, sources said that the Center is aware of the fact that cryptocurrency is an evolving technology. The decision has been made that the government will keep a close watch and take proactive measures.
However, an indication that the government may not close the doors completely came from sources who said there is consensus that the measures taken will be progressive and forward-looking based on proactive engagement with experts and other stakeholders.
The government believes that since the problem transcends the borders of individual countries, long-term politics would require global partnerships and collective strategies.
CRYPTO CURRENCY INVOICE
The Center is ready to present a comprehensive cryptocurrency bill that can be tabled in the next winter session of Parliament.
The Standing Committee on Finance is scheduled to hold discussions on crypto assets at its next meeting on November 15.
The sources said that the RBI has already relayed its reservation on cryptocurrencies.
On Friday, the central bank made its stance on cryptocurrencies clear, saying it has serious concerns around such assets, reiterating its long-standing position on the use of virtual currencies.
RBI Governor Shaktikanta Das has previously stated: โThere is no change in the position of the RBI. We have big concerns around cryptocurrencies, which we have relayed to the government. And as for investors, it is up to each investor to do their due diligence and make a very careful and prudent decision. "
During discussions with the government or interactions with experts, sources said that there is a perception that the central bank's objections to investing in cryptocurrencies are too strict. Center is reluctant to take a position on cryptocurrencies like China, which has banned them. The view is to adopt a more moderate regulatory path. This could mean that India might not opt โโfor a complete ban.
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The issue that the government needs to clarify is whether cryptocurrencies are treated as a currency or an investment asset. However, the main sources were of the opinion that there is not much chance for cryptocurrencies to get currency status in India.
The challenge of providing cryptocurrencies with the status of a currency is who provides the guarantee of its value. In India, the Fiat currency system involves banknotes and coins backed by statute and regulated by the central bank, while investment assets are regulated by the Securities Exchange Board of India (SEBI). A senior source indicated that the old system cannot be affected by cryptocurrencies.
However, the government realizes that the cryptocurrency craze offers an economic opportunity if it is well regulated. The sources said that crypto players are the new big employers and earnings from assets could expand the tax network.
TAX RULES FOR OFFERED CRYPTO
The cryptocurrency bill rumored to be in the works will also be intended to tax your earnings. The problem that the bill can clarify is if cryptocurrencies bring profits, then they could be taxed under the capital gains tax regime; if it is a service that is provided then it should be covered by the GST mechanism.
This means that the bill could include a direct tax provision, while on the services issue, the GST council can take a call or charge transaction service taxes.
Based on the recommendations to ban cryptocurrencies and create an official digital currency by the SC Garg Committee established by the Center prior to the last budget session, the government had issued 'The Bill on Cryptocurrencies and Digital Currency Regulation official, 2021 '.
The intention of the bill was stated to be "the creation of an enabling framework for the creation of the official digital currency to be issued by the Reserve Bank of India."
The bill also sought to ban all private cryptocurrencies in India and marked in green some exceptions to promote the underlying cryptocurrency technology and its uses.
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CRYPTO'S GROWTH MAY PRODUCE BAN MOVEMENTS
Claims about the rise of the cryptocurrency market abound. Indian cryptocurrency exchanges and industry bodies note that cryptocurrency investments by Indians have crossed the Rs 6 crore mark. Research companies claim that the value of the user base of nearly 2 trillion investors could be Rs 10 million.
Growth seems to become the cryptocurrency shield against a total ban.
Within a year, two unicorns have already appeared: CoinDCX and CoinSwitch Kuber.
However, the Center is now in a rush to clarify the picture and provide a legal framework without sending a signal that it is being clumsy, given that celebrities endorse the products and advertisements are plentiful.
The real concern in the government is that with the yields of banks and other investment instruments falling and taxes on profits, young investors have turned to cryptocurrencies like Bitcoin and Solana.
The concerns discussed in PM Modi's review refer to young people, who are unaware of the stock market and other investment avenues that cryptocurrencies take, they are not unfounded.
The average age of 11 million investors with the fledgling CoinSwitch Kuber unicorn is said to be 25; Furthermore, 55 percent of the users are from cities like Delhi and Mumbai.
