Reserve Bank of India (RBI) Governor Shaktikanta Das rarely gives cryptic answers. But at the World Economic Forum in Davos earlier this year, his first response to a question about the future of cryptocurrencies in India was exactly that: โvery bad.โ Just days after the US Securities and Exchange Commission (US SEC) approved bitcoin exchange-traded funds, the governor said: "they (the US SEC) are responsible for the well-being of their nation and we for ours. The RBI has time and again maintained its stance against cryptocurrencies, saying they could lead to tax evasion, decentralized peer-to-peer (P2P) activities and loss of revenue from โseigniorageโ โ profits made by a central bank through from the creation of money. Of course, he has also pointed out in the past the risks of โterrorist financingโ and โmoney launderingโ, all risks to fiscal stability. What the central bank may have overlooked is that things like this can happen across all asset classes.
In this context, a report suggesting that the Securities and Exchange Board of India (Sebi) has recommended to a government panel that cryptocurrencies should be regulated through multiple regulators is an interesting development. It also comes at a time when Sebi chairman Madhabi Puri Buch has been pushing for a T+0 deal at the national level. market and has said there is a good chance funds will move away from regulated markets toward cryptocurrencies and similar assets if exchanges do not move toward instant settlement. Sebi's argument is that cross-border asset classes that operate outside regulated markets have the advantage of anonymity, tokenization and instant settlement, and it is possible to offer the latter two to investors. The market watchdog sees itself as the regulator of cryptocurrencies in the form of securities, initial coin offerings (ICOs) and also issues licenses for stock market-related products, quite similar to what the SEC does. from the US by monitoring tokens that are like securities and exchanges. He also recommended that cryptocurrency investors' complaints be resolved under the Indian Consumer Protection Act.
Both Sebi and drivenThe arguments have their own merits. For the government, the choice is between accepting that cryptocurrencies are a reality or ignoring them completely out of โfear of the unknown.โ Today, the RBI's tough stance seems to have rubbed off on the Indian government. Their initial efforts seem aimed more at curbing enthusiasm. Has imposed 30% tax plus capital gains surcharge. It also does not allow any offsetting of capital gains against losses, which is permitted for other asset classes. Then, there is a TDS (tax deducted at source) of 1% on the total sale amount, irrespective of the profit or loss.
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But recent figures show that interest is far from waning. There are reportedly over 20 million cryptocurrency investors in India. To put these figures in perspective, there are 22 million taxpayers in India (88 million file taxes) and around 150 demat accounts (although there will be a lot of double counting). The most interesting part is that the age of around 80% of investors is 20-35 years, and 50% have income less than 5 lakh per year. Clearly, cryptocurrencies have caught the attention of many young people. Therefore, it is clear that the government cannot afford to ignore cryptocurrencies for too long. A good start would be to let Sebi oversee the securities, stock market and ICO segments, and decide the way forward based on this experience.
