Currently, cryptocurrencies are not regulated in India and the country`s government has stated that cryptocurrencies are not legal tender and discourage their citizens from trading these currencies.  After cryptocurrencies began to rise in India and the government investigated potential revenue losses, the government formed a committee to report on the use of virtual currencies in the country.  The committee`s report recommended a blanket ban on all private cryptocurrency ownership in India. Now, the government plans to introduce a new bill titled “Cryptocurrency and Regulation of the Official Digital Currency Bill, 2021.”  The bill would give investors six months to liquidate their assets and would not be penalized.  India would be the first major economy to go so far as to ban the possession of cryptocurrency, as other countries have only banned mining and trading.  The Reserve Bank of India also plans to launch a state-owned cryptocurrency.  The government has stated that cryptocurrency is not legal in India from now on Last year, Sitharaman told parliament that “a new [cryptocurrency] law is in the works,” warning that “the risk of cryptocurrency and falling into the wrong hands will be monitored.” China`s central bank declared all cryptocurrency-related transactions illegal in September 2021 and imposed a blanket ban, sending the strongest signal yet of its determination to crack down on the industry. The debacle is the latest example of the regulatory uncertainty facing cryptocurrency exchanges in India despite or perhaps due to their popularity in the country. Third, despite these formidable challenges, India continues to offer significant promise for cryptocurrency exchanges.
Companies like Coinbase recognize that India`s population is getting younger, while internet penetration and adoption of digital assets will only increase. Exchanges will need to assess how long they are willing to wait and what they are willing to tolerate given recent developments in New Delhi. The Indian government on Tuesday announced plans to tax cryptocurrency revenues, making India the latest major country to move quickly toward legalizing and regulating the digital asset. By declaring a flat tax of 30% on income from trading cryptocurrency and non-fungible tokens, India joins the US, Germany and a wave of other countries that have given their citizens the green light to trade digital coins, which has fascinated young Indians. It will also join China as one of the few countries to experiment with its own digital coin. The Cryptocurrency Bill and Official Digital Currency Regulation, 2021, has not yet been submitted by the government. The bill aims to ban all private cryptocurrencies in India, but “it allows certain exceptions to promote the underlying technology of cryptocurrency and its use,” the document says. The most recent amendment to Schedule III of the Companies Act, 2013, which was amended on 24. March 2021, indicates that from the new fiscal year, all companies will be required to disclose their investments in cryptocurrencies and also disclose any gains or losses associated with the transaction. The holder of virtual currencies must also indicate the number of participations, details of the deposit and advances of a person for the purpose of trading or investing in the cryptocurrency. Sitharaman also said that the digital rupee will most likely be issued during the 2022-2023 period, which is the first time the Indian government has given a timeline for the launch of a central bank digital currency (CBDC).
– Somanathan said that the digital rupee is backed by the RBI, which will never fail. “The money will come from RBI, but nature will be digital. The digital rupee issued by RBI will be legal tender. We can buy non-digital assets with the digital rupee as we buy ice cream or other things with our wallet or payments through the UPI platform. “There has been a lot of discussion about the legality of cryptocurrency in India. The various measures taken by the Indian government establish the clear intention of the authorities to give crypto-currencies a recognized legal status. Regarding the introduction of CBDCs, Sitharaman said a “digital rupee” “will be issued using blockchain and other technologies; will be issued by the RBI from 2022-23. This will give a big boost to the economy. Sidharth Sogani, founder and CEO of cryptocurrency research organization Crebaco, said: “You can`t tax something illegal. So this is a very positive step on the part of the government and very good for the industry.
If there is fiscal clarity in this area, more money will likely come in. However, outside of jurisdictions that have explicitly banned cryptocurrency-related activities, very few countries prohibit cryptocurrency mining. Finance Minister TV Somanathan went even further, saying that “Bitcoin, Ethereum or NFT will never become legal tender,” reflecting New Delhi`s position by noting that the government taxes income at exactly the same rate as “profits from horse racing or betting and other speculative transactions.” – However, the Minister of Finance clarified that things that are not legal do not mean that they are illegal. “I`m not saying Bitcoin or Ethereum is illegal, but it`s not illegal either. But I can say that when regulation comes for cryptocurrency, it will also not be legal tender,” Somanathan said. Russia has been opposing cryptocurrencies for years, saying they could be used for money laundering or to fund terrorism. However, Russian leaders are using cryptocurrency to circumvent sanctions imposed by the United States and its allies in the wake of Russia`s invasion of Ukraine, blockchain analytics firm Elliptic said. The research company has tracked down a Russian crypto wallet that has “significant assets.” Another industry source, who asked not to be named, pointed to a contradiction in the government`s statements. In the past, the government has said that it is trying to ban all cryptocurrencies in India, but will allow some exceptions to promote the underlying technology. First, trade operating in India is unlikely to get any clarification from the government anytime soon. The relevant bills are still dormant and the central government has yet to issue any real regulation for digital tokens. Sitharaman recently summed up the mood in New Delhi at Stanford University, simply noting that the government`s approach to crypto “cannot be rushed.” The FSB is also investigating international precedents surrounding cryptocurrency legislation, and its report is expected to guide India`s legal policy to address concerns related to money laundering and terrorist financing around cryptocurrency trading that have recently surfaced in India.
Freeman Law can help you with digital currencies, tax planning, and tax compliance. Contact us now or schedule a consultation or call (214) 984-3410 to discuss your concerns about cryptocurrency and blockchain technology. A report from the Financial Stability Board (FSB), expected in October, will help the government decide whether to ban cryptocurrency transactions via wallets and provide a legal framework to deal with cryptocurrency trading in India, a senior government official told Outlook Business. “Regulators internationally recognize legitimate uses of cryptocurrency and develop standards for countries that can be used as guidelines to regulate the industry,” says Laurel Loomis Rimon, partner and crypto expert at Paul Hastings LLP. Instead, New Delhi has created a byzantine regulatory framework that leaves fundamental questions unanswered, including whether cryptocurrency trading is legal in India. At a post-budget press conference, Sitharaman said consultations on crypto regulation and what is legal are ongoing, which will not be clear once the regulatory document is finalized. But a few hours later, the National Payments Corporation of India (NPCI), the regulator that oversees UPI, issued a terse one-sentence statement claiming it was not aware of a cryptocurrency exchange using the payment system. In his announcement on Tuesday, Sitharaman said that the digital rupee will be issued and controlled by the Reserve Bank of India, which fundamentally distinguishes it from decentralized cryptocurrencies such as Bitcoin. “The introduction of the central bank`s digital currency will give a big boost to the digital economy,” Sitharaman said. “Digital currency will also be a cheaper and more efficient currency management system.” “We are waiting for the (FSB) report, which will be important from the point of view of cryptographic legislation.
We also hope that it will be about how to manage wallet transfers (from crypto). Sachit Gupta, 28, owner of a food delivery business in Kolkata, said he invested small sums in cryptocurrency from mid-2021, at a time when many other young Indians were entering the market. India`s recent cryptocurrency decisions point to turbulent times for the country`s thriving but booming digital currency industry. The move is the latest in a global crackdown on cryptocurrencies, with governments from Asia to the United States fearing that private, highly volatile digital currencies could undermine their control over financial and monetary systems. – Somanathan also stated that the digital rupee will not be like Bitcoin and Ethereum. “With the digital rupee, you make your transaction as you do now through your digital wallets like Paytm, UPI. The digital rupee is legal tender and is synonymous with cash payments that we make,” he said. – Somanathan went on to say that crypto assets are assets whose value is determined between two people, you can buy gold, diamonds and crypto assets, but this value is not approved by the government.