SEP 04, 2023
All You Need To Know About India’s Crypto Bill
JUL 07, 2023
A cryptocurrency is a form of virtual asset based on a network that is scattered across a huge number of computers. It is a decentralized form that allows cryptocurrency to exist outside the control of the central government or authorities
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was introduced in the Lok Sabha. The bill seeks to create a favorable framework for the creation of digital currency that will be issued by the Reserve Bank Of India (RBI).
The Cryptocurrency Bill was scheduled in the year 2021, in the Winter Session of the Parliament but it didn’t happen. However, in the current Lok Sabha session, the Ministry of Finance was questioned about the Bill.
The question was raised as to: What is the current status of the Cryptocurrency Bill? When will it be tabled and be open for inputs? Which ministry/department will regulate the virtual assets like cryptocurrencies, non-fungible tokens (NFTs) , decentralized applications, real estate tokens and other assets.
The Minister of State Finance, Shri Pankaj Chaudhary, on behalf of the Ministry of Finance answered the questions by saying, “Crypto assets are by definition borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation on the subject can be effective only with significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.” He later added that the policy-related ecosystem and crypto assets are with the Ministry of Finance.
The government of India was scheduled to introduce new cryptocurrency regulations during the Winter Session of Parliament. This was the second time that the Cryptocurrency bill was listed but got delayed. The first time it happened was during the Budget Session of Parliament in 2021.
Cryptocurrency is a debatable topic ever since it was introduced. Some countries believe in the decentralized power of cryptocurrency and some don’t. The legal status of crypto is different from country to country.
Cryptocurrency is used anonymously to conduct transactions globally between account holders. This raises currency concerns for the governments of different countries. Some of the officials or legislators because of the lack of control and illicit ties may not support the use of cryptocurrency.
Under the country’s anti-money laundering and counter-financing of terrorism laws (AML/CFT), some countries may have introduced regulations in efforts to lower the usage for these purposes.
Let us see the countries in which cryptocurrency is legal, illegal or restricted.
The U.S. has a dual governance system. There can be different laws for cryptocurrency in different states. For example, New York has been in favor of cryptocurrency since 2016 when it launched a licensing framework for crypto and business exchanges called “BitLicense”.
There are many states in the U.S. that are yet to take a stance on cryptocurrencies. The different states hold varied regulations on cryptocurrency but to sum it up the U.S. has a positive approach to the trading community and it is a country where cryptocurrency is legal.
The European Union has 27 member countries and the legislation at the Union Level is quite a complicated zone. So far, the majority of countries in the European Union have opted for a soft regulatory framework for cryptocurrency.
In the year 2020, the European Commission finalized a plan for legislation to regulate virtual assets, which many companies or agencies have endorsed within the Union. The legislation is planned to keep the financial regulatory frameworks from fragmenting. The commission also makes sure that people have access to and can securely use cryptocurrency.
The United Kingdom has not yet formulated any separate legislation regarding the regulation of cryptocurrency. They do not consider it as legal tender but as property. The Financial Conduct Authority (FCA) under the currency system regulates licensing to authorized businesses related to cryptocurrency including exchanges. They have a firm set of rules, and the ones that are seeking the license have to strictly follow them.
The United Kingdom gains taxes from crypto trading just like any other paper currency trading. The businesses that are involved in cryptocurrency and crypto exchanges have to follow corporate tax rules.
Canada has a cryptocurrency-friendly stance and cryptocurrencies are viewed as an item by the Canada Revenue Agency (CRA) for income tax purposes. This means that any income or capital gain from a cryptocurrency transaction must be reported.
The country has been more motivated than others when it comes to crypto regulations. It became the first country to accept a bitcoin-traded fund (ETF), with some of them now trading on the Toronto Stock Exchange.
Canadians consider crypto exchanges to be money service businesses that are under the purview of the Proceeds of Crime and Terrorist Financing Act. In return, as a result, the exchanges need to be registered under the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). People can report certain records, abide by compliance plans or any suspicious transactions.
Here’s a list of the countries where cryptocurrency is banned:
Cryptocurrencies as a payment medium in India are not regulated by any central authority. There are no rules and regulations or any guidelines laid down for settling disputes while dealing with cryptocurrency. So, trading in cryptocurrency is done at investors’ risk.
The Finance Minister of India, Nirmala Sitharaman, proposed to tax digital assets and has increased the debate on the legality of cryptocurrencies in the country. While many have embraced the decision to tax virtual currency as it is the first step to recognizing it, the government is yet to pass any official clarification on this matter of whether currencies like Bitcoin are legal or not in India.
Based on the various key statements made by the Reserve Bank Of India Governor as well as various government spokespersons including the Finance Minister of the country, one can conclude that cryptocurrency is illegal, but there is no certain ban on it in India. They are unregulated but according to the recent Union Budget 2022, the government of India announced a 30% tax on gains from cryptocurrencies and a 1% tax deducted at source.
Tax on cryptocurrency is one of the most confusing aspects in India. Initially, there was no Income Tax Act or Goods and Services Tax (GST) defined cryptocurrencies in India. In the recent Union Budget 2022 outcome, the Finance Minister presented a tax regime for virtual or digital assets that include cryptocurrencies.
The Cryptocurrency Bill 2021, is a legislative initiative that was introduced in the Lok Sabha by the government to regulate the thriving market of cryptocurrency in India. The industry has seen a rush in investment in the last few years, especially during the covid period not just domestically but also internationally.
Crypto trading platforms like WazirX, CoinDCX, Zebpay, etc. in India are witnessing a big leap in volumes. An unregulated crypto market is unfavorable and risky even when the government wants to protect young entrepreneurs and investors. By introducing the Cryptocurrency Bill in 2021, the government officially took a step toward regulating cryptocurrency. The bill seeks to create a favorable structure for the creation of the official digital currency that will be issued by the Reserve Bank Of India (RBI). It also prohibits all other private cryptocurrencies but, with certain exceptions to boost the underlying technology of cryptocurrency. In the Union Budget of 2022, the government already took the step of imposing a 30% tax and 1% TDS on gains from virtual digital assets or cryptocurrencies.
The Cryptocurrency Bill 2021, is still in process and might even take a while to be open for consultation. The Government of India already took a step when they introduced taxation on virtual assets in the Union Budget 2022. However, the introduction of the Cryptocurrency Bill is an important milestone.
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