PERSPECTIVES
The cryptic case of the ‘crypto elephant’ in the room While the debate on whether crypto currency is a boon or a bane is simmering in the country, IBT analyses the possible contours that cryptocurrency regulation should now take. BY NIKHAAR GOGNA
R
ecently, El Salavador became the first country in the world to use bitcoin as legal tender. India, too, is not far behind in this cryptocurrency race. A report by Chainanalysis suggests that India has the second-highest cryptocurrency users in world. Furher, it is interesting to note that while India has decided to not recognise bitcoin as a legal tender, the 2022-23 Union Budget has proposed to impose a 30% tax on gains made on such trades, besides subjecting crypto transactions beyond a threshold to 1% TDS (Tax Deducted at Source). Finance Secretary TV Somanathan emphasised later that 30% is also the taxation rate for all speculative activities like horse racing and that crypto will never be legal tender. At the same time, the government has maintained that only the ‘Digital Rupee’ of the Reserve Bank of India will be a legal
tender in India and it is working on the ‘Cryptocurrency and Regulation of Official Digital Currency Bill’. As the cryptocurrency market grows in India, it is pertinent to understand this concept, what the crypto bill encompasses and how it can be regulated. WHY REGULATE CRYPTO? Virtual currencies have no single authority regulating their issuance. They also have the advantage of eliminating third party merchants such as Visa or Master Card, thereby, reducing the transaction cost. Cryptocurrency transactions
are validated by other users and then stockpiled in a secure manner. An Inter-Ministerial Committee constituted to study the issues related to virtual currencies (2019) recommended banning of cryptocurrencies in India and imposing fines & penalties for carrying out any activities connected with cryptocurrencies in the country. This was on account of the risks associated with them and volatility in their prices. Some of the technical risks identified by the committee were scalability and transaction speed; interoperability and integration; cyber security; data
CRYPTOCURRENCY REGULATION: A BUMPY RIDE
2013
RBI warns the public against use of cryptocurrency
14 | India Business & Trade • Apr-May, 2022
FEB 2017
RBI circular re-emphasised its concerns
END-2017
RBI & finance ministry release another warning, 2 PILs in Supreme Court
