The government has decided to hand over the matters relating to cryptocurrency to Sebi, as India looks forward to classifying it as financial assets.
According to the reports, investors will get three months to report their crypto holdings and comply with new norms. However, the final decision relating to cryptocurrencies will only be considered by the Cabinet on Wednesday.
The move might be the prologue for the new draft of the Cryptocurrency and Regulation of Official Digital Currency Bill 2021. The bill is more likely to use the term crypto-assets instead of cryptocurrencies.
India always kept its distance from cryptocurrencies.
When this bill will be presented in the winter session, it will declare the definitive stance of the government over the matter. According to the bill, it seeks to ban private cryptocurrencies but promote its technology.
However, industry sources claim that, the government would take a nuanced stand, and may not go into a ban on private cryptocurrencies. The Centre might prohibit its use as a legal tender and consider them as assets.
One of the sources said that the bill would generally prohibit all individual activities in the process that stretch from mining, generation to its use as a medium of exchange and as a store of value.
That is, there will be a prohibition for every step from its generation to its usage.
According to the Chief Economic Advisor, KV Subramanian even opposes the concept of cryptocurrencies as an asset. He states that the financial asset is beset with risks and whatever the decision is made it should be through careful examination.
The reason for the caution is that this currency is not backed-up with any valuables. It is not even part of real economic activities. It is extremely volatile, as its value is based more on speculation. That would adversely affect the retail investors.
Bill also aims to regulate this wild west of the e-economic world. It will also talk about and create a framework for the launch of the RBI issued official digital currency.
As of now, some investors are paying capital gain tax on the income from the cryptocurrency. This tax structure might expand, as the government is thinking to amend income tax laws to bring this under the tax regime by the next budget.
The government should neither ban nor adopt a leave it alone mentality, when it comes to cryptocurrencies. These currencies because of their informality have become the unofficial currency of the criminal underworld.
If let alone it poses a serious threat to the nation on different fronts. But one cannot deny the march of technological progress and also, the present-day holdings of the investors should not be ignored.
Both should be balanced before any move is to be taken.
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