PM Modi chairs meet on cryptocurrency; Centre may table bill over regulation in Winter Session – India Today
In a clear indication that the Centre is on the verge of formulating a long-term digital currency strategy, Prime Minister Narendra Modi on Saturday chaired a comprehensive meeting on the way forward for cryptocurrency and related issues.
Top sources after the meeting said that the first regulatory measures the government could initiate after the PM’s review would be against two defic…….
In a clear indication that the Centre is on the verge of formulating a long-term digital currency strategy, Prime Minister Narendra Modi on Saturday chaired a comprehensive meeting on the way forward for cryptocurrency and related issues.
Top sources after the meeting said that the first regulatory measures the government could initiate after the PM’s review would be against two deficiencies that go with the popularity of cryptocurrencies — over-promising and lack of transparency. This would involve putting legal curbs against misleading and non-transparent advertising.
The sources said that unregulated crypto markets cannot be allowed to become avenues for money laundering and terror financing.
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PM Modi held the review meet after a long drawn consultative process between the Finance Ministry and the Home Ministry along with the Reserve Bank of India (RBI). The exercise involved extensive consultations with experts from across the country and the world. Global examples and best practices were also looked at.
After the meeting, sources said that the Centre is cognisant of the fact that cryptocurrency is an evolving technology. A decision has been taken that the government will keep a close watch and take proactive steps.
However, in an indication that the government may not shut the doors completely came from sources who said that there is consensus that the steps taken will be progressive and forward looking based on pro-active engagement with experts and other stakeholders.
The government feels that since the issue cuts across individual countries’ borders, long term policy would require global partnerships and collective strategies.
CRYPTOCURRENCY BILL
The Centre is all set to bring a comprehensive bill on cryptocurrency which may be introduced in the coming Winter Session of Parliament.
The Standing Committee on Finance is scheduled to hold discussions on crypto assets in its next meeting on November 15.
Sources said that the RBI has already conveyed its reservation on cryptocurrencies.
The central bank on Friday made its stance clear on cryptocurrencies, saying it has major concerns around such assets, reiterating its long-standing position on the use of virtual currencies.
RBI Governor Shaktikanta Das has previously stated, “There is no change in the RBI’s position. We have major concerns around cryptocurrencies, which we have conveyed to the government. And, about investors, it is for each investor to do his/her due diligence and take a very careful and prudent call.”
During the discussions with the government or interactions with experts, sources said there is a perception that the central bank’s objections to crypto investment are too stringent. Centre is averse to taking a position on cryptocurrencies like China, which has banned them. The view is to adopt a more moderate regulatory route. This could mean that India may not go for a complete ban.
READ | Government unlikely to ban Bitcoin and other cryptocurrencies, finding middle path
The issue the government needs to clarify is whether cryptocurrencies get treated as a currency or an investment asset. Top sources, however, opined that there isn’t much chance of cryptos getting the status of currency in India.
The challenge in providing crypto the status of a currency is who provides the guarantee for their value. In India, the Fiat system of currency involves currency notes and coins backed by a 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 may not be disturbed for cryptocurrencies.
However, the government realises that the craze for cryptocurrency offers an economic opportunity if regulated well. Sources said that crypto players are the new big employers and the earnings from the assets could expand the tax net.
TAX RULES FOR CRYPTO IN THE OFFING
THE bill on cryptocurrencies which is rumoured to be in the works will also have an intent to tax the earnings from them. The issue the bill may clarify is if the cryptocurrencies bring gains, then they could be taxed under the Capital Gains tax regime; if it’s a service being 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 may take a call or tax on transaction service.
Based on the recommendations to ban cryptocurrencies and create an official digital currency by the SC Garg Committee set by the Centre ahead of the last Budget Session, the government had issued ‘The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021’.
The intent of the bill was stated to be “creation of a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India.”
The bill also sought to prohibit all private cryptocurrencies in India and green flagging few exceptions to promote the underlying technology of cryptocurrency and its uses.
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CRYPTO GROWTH MAY THWART BAN MOVES
Tall claims about the crypto market boom abound. The Indian crypto exchanges and industry bodies peg crypto investments by Indians to have crossed the 6-lakh crore mark. Research firms claim that the worth of user base of nearly 2 crore investors could be 10 lakh crore
The growth seems to be becoming the shield for cryptocurrencies against a complete ban.
Within a year’s time, two unicorns — CoinDCX and CoinSwitch Kuber have already come up.
The Centre is however in a rush now to clear the picture and provide a legal framework without sending a signal that it’s being heavy-handed, given the fact that celebrities are endorsing the products and advertisements are plenty.
The real worry in the government is that with returns from banks and other investment instruments going down and taxes on gains in place, young investors have taken to cryptocurrencies like Bitcoin and Solana.
The concerns discussed in PM Modi’s review meet about young people, unaware about stock market and other investment avenues taking to cryptocurrencies are not unfounded.
The average age of 11 million investors with fledgling unicorn CoinSwitch Kuber is said to be 25 years; additionally, 55 per cent of the users are from cities like Delhi and Mumbai.
