Many Indians have invested a huge amount of their income and savings funds in the cryptocurrency market, although it is volatile and risky in many aspects, cryptocurrency investing and trading have become rapidly popular among the youth and earning body. India lacked laws to regulate cryptocurrency and the latter wasn’t recognized as a legitimate ‘currency’. However, India came to realize that India’s crypto bill was in the work for almost two years. Lately, the finance minister of India, Nirmala Sitharaman has announced that it is most likely to expect the draft law to regulate cryptocurrency will be listed in the parliament for the monsoon session. We have also discussed how shall the framework of cryptocurrency regulation look like.
India’s Gradual Yet Massive Development Towards Crypto Regulatory System
In March 2021, respected Nirmala Sitharaman said that India will not put an umbrella ban on cryptocurrencies by “shutting off all options” and assured that they will approach this matter with adjustment to the needs of the country and its citizens.
The Ministry of Corporate Affairs (MCA) had made it mandatory for all the companies of transactions of virtual currencies, that all the profit and loss must be noted and shown in the balance sheet. This guideline was introduced in April 2021 and executed in May 2021.
The banking systems of India were asked to sever their connections to the cryptocurrency exchange and trading platform, Wazir-X. later the financial crime investigator, the Enforcement Directorate (ED) issued notice to the biggest interface of the cryptocurrency market in India, regarding money laundering acts. However, the point of focus, in this case, is India started to govern the cryptocurrency market more carefully.
Analysis Through Past Incidents
In the USA, in 2014, cryptocurrency was considered as a property that is the taxes imposed on these digital coins or cryptocurrency will be defined as capital tax. On the other hand, if we take Singapore for an example, if any business trades virtual currencies, then they are required to pay tax on their profits as a business income tax. But if anyone holds the cryptocurrency for the long term there is no capital gain tax. Finally, in the UK, they have clearly stated that for any crypto asset used for a transaction, or any profit incurred from trading cryptocurrency, a capital gain tax will be imposed upon it.
Now, looking back at the formation of India’s ultimate rule book, ‘The Constitution of India’ has been a result of an amalgamation of principles from various countries. However, the major part of our Constitution is inspired by that of the British. So, we can infer analyzing the historical incidents that India might take a similar stance in the regulation of cryptocurrency such as the UK. That is cryptocurrency trading might be considered as a financial trade and capital gain tax might be imposed. However, we can’t be completely sure what turn the authorities might take.
Monsoon Session Budget Bill
Finance minister Nirmala Sitharaman said in an interview that, “bill was expected in the earlier session of parliament it recommended banning of the private cryptocurrency and was supposed to lay out a framework for the digital currency by the RBI”. [Reserve Bank of India is India’s Central Bank which looks upon the regulations of national funds under the jurisdiction of the Ministry of Finance].
India might be moving forward to experiment and assess the implementation of Central Bank Digital Currency like many countries are.
The finance minister in an interview to one of India’s most popular news media channels, The Hindu, “India is inching closer to regulating cryptocurrency within its borders, the country’s finance minister Nirmala Sitharaman told The Hindu that India’s crypto bill is ready and the government has taken inputs from industry stakeholders to prepare the document.”
The finance minister of India later added that “we have done a lot of work on it. we have taken stakeholders’ inputs. The Cabinet note is ready. We have to see when the Cabinet can take it up and consider it so that then we can move it”.
From what she told, we might interpret or predict that the regulatory laws of cryptocurrency in India could be launched on July 19, and we might expect a range of debates regarding the contents of the document in the monsoon session of the parliament.
The budget session of parliament which usually occurs around February to march, couldn’t be held in 2021 as per the schedule. This is due to the outbreak of the Covid-19 pandemic’s second wave. Hence, the respective bill’s draft will also be presented in the next parliamentary session.