The cloud of uncertainty that has hung over crypto regulatory debates appears to be lifting, but the government’s approach to regulating and taxing digital money remains unknown.
For years, India’s cryptocurrency regulatory landscape has been unclear. Since last year, the administration has delivered conflicting signals regarding cryptocurrency legislation. While Finance Minister Nirmala Sitharaman has occasionally stated that there will be a window of opportunity for crypto firms and experimentation, reports of a total ban have occasionally arisen, much to the consternation of all.
On the other side, India’s central bank, the Reserve Bank of India, has maintained a consistent stance against cryptocurrency. Following the submission of a report on cryptocurrencies by an inter-ministerial committee in 2021, which recommended a ban along the lines of the 2019 draft crypto bill, the current draft crypto bill now awaits approval from the Union Cabinet before being placed on the parliamentary agenda for the next session.
However, the gray cloud of uncertainties over the Indian crypto legal landscape appears to be lifting, as crypto exchange WazirX reported that the draft crypto bill for 2021 wants to categorize cryptocurrencies as commodities. The Economic Times reports that virtual currencies will be recognized as commodities for all purposes, including taxation, payment, investment, and utility.
According to the ET report, the government would regulate crypto assets based on their end-use, and the bill is likely to detail the taxation of crypto assets in order for them to be accurately classified. To begin, the government must classify cryptocurrencies in order to establish how they can be regulated and taxed.
“Categorizing crypto is critical to having the right crypto regulations in India. Crypto is primarily categorized into four major categories globally — asset, utility, currency and security.”
Nischal Shetty
According to an unidentified source, the government’s draft bill is aimed at defining cryptocurrency and its treatment in various use cases, so that it can be properly recorded in financial statements and taxed appropriately. It has no intention of allowing payment and settlement via virtual currencies.”
Sathvik Vishwanath, CEO and co-founder of cryptocurrency exchange Unocoin, told Forkast.News that “[classifying crypto as assets] makes the most sense for a country like India because the country already has a very robust financial structure.” Indians will be able to benefit from the utility that cryptocurrencies provide,” while classifying them as commodities relegates the benefits of utilizing cryptocurrencies for payments to a “gray zone.”
It’s unsurprising, then, that the government is not considering recognizing crypto assets as currencies, much less considering making one legal currency, as El Salvador has done. The Reserve Bank of India has underlined that virtual currencies lack intrinsic value and can never be used as currency.
“This is a very positive step for the crypto business, and I’m delighted the government is moving in this path toward crypto regulation,” Shetty added.
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