|Introduction: Contextual introduction.|
Body: Explain evolving regulatory framework for crypto assets in India.
Conclusion: Write a way forward.
Cryptocurrency enables relatively invisible transactions, with serious implications for crime, terrorism, money laundering, tax evasion, etc. Cryptocurrencies are getting popular because of their underlying technology of Blockchain, and due to some of their inherent advantages over fiat currencies, like faster transactions and require less or no additional transaction fees and protects users from issues like identity theft.
Evolving regulatory framework for crypto assets in India:
- In February, RBI had asked financial intermediaries it regulates to follow KYC norms and other relevant standards for remittances following transactions in crypto assets.
- The Finance Bill 2022 has promulgated a new taxation regime for the class of VDAs including cryptocurrencies and non-fungible tokens (NFTs). The gains arising from the transfer of VDAs are proposed to be taxed at the rate of 30%. However, the Act did not have any provision related to legalizing/banning the cryptocurrencies or any other Digital Asset.
- Under the presidency of India, G20 Finance Track discussion has put the regulation of VDAs to curb their use in money laundering and terror financing as a top priority.
- Superapp CryptoWire recently launched India’s first cryptocurrency index, IC15. It will measure the performance of the 15 most widely traded cryptocurrencies listed on leading crypto exchanges by market capitalization
- In July 2022, rules regarding 1% tax deducted at source on cryptocurrency came into effect.
- Recently, the Finance Ministry has notified that crypto or virtual asset businesses will now be in the ambit of the Prevention of Money Laundering Act, 2002 (PMLA). It also mandates that crypto exchanges and intermediaries dealing with virtual digital assets (VDAs) must have proper KYC documentation for all customers they onboard.
Cryptos need intelligent light-touch regulation. Bans do not work and hurt the exuberant innovation that can throw up valuable products and services. Crypto assets need to be treated as a financial asset with intermediaries required to follow reporting standards.