Recent developments in the crypto world, which include the Bitcoin freefall from $35000 in the month of April to below the $40000 mark after the Musk statements, have also brought back focus on laws around the governance of cryptocurrencies in India. More than 7 million Indians have also pumped around $1 billion in the cryptos, and the Indian Government has the tough task to allow the financial technology space to flourish in India, which makes sure its done without the concerns of any safety. So, now let us understand the central government’s stand on cryptocurrencies and their legal status in the country.
What’s the government stand on cryptos?
After the purpose of over banning or legalizing cryptocurrencies, the Government of India has now taken an encouraging step towards regulating the digital currencies in India. The Ministry of the Corporate Affairs, which is an acronym for MCA, has also made it mandatory for the companies to disclose the crypto investments or trading during the financial year. Some of the experts also see it as a positive step and expect the taxation rules to follow through. This is also being considered as the first step towards regulating cryptocurrencies in India.
The accounting of the crypto assets is also aimed at curbing illegal activities and circulation of black money with the help of cryptos. It can also help to improve corporate governance with more transparent disclosures. The Centre has also assured crypto stakeholders that there would not be a blanket ban on digital currencies and that it is still formulating its full opinion on the matter. Nirmala Sitharam, the finance minister of India, has also revealed the centre was open to experimentation with some of the new latest technologies and is not closing its mind for them.
What’s its legal status in India?
Cryptocurrencies are not illegal in India. So, if you want to buy, let’s say, a Bitcoin, then you can do so and start trading on it. Moreover, India does not have any regulatory framework as of now to govern cryptocurrencies. The government constituted an Inter-Ministerial Committee (IMC) on the 2nd of November 2017 to study virtual currencies. The group also reported, along with a Draft Bill, flagged the positive aspect of the distributed ledger technology and suggested several applications, especially in the financial services, for its use in India, which includes the banks and some other financial institutional firms.
Moreover, the Centre had also flagged reservations across its misuse and wanted to put a blanket ban in India. With respect to the latest report, cryptocurrency may not face a complete ban in India. The centre may soon be going to set up a panel to regulate them. The decision was taken after various cryptocurrencies exchanges that are being urged by the Centre to regulate virtual coins rather than banning them.
Is cryptocurrency taxable currently?
Yes, cryptocurrency transactions are taxable as of now in India, where the person earning such gains is an Indian tax resident or where the crypto is said to be domiciled in India.
Were cryptocurrencies ever banned in India?
The Reserve Bank of India (RBI), with the help of a circular in the month of April 2018, had advised all the entities regulated by it not to deal in the virtual currencies or offer services for facilitating any person or entity in dealing with or simply settling them.
In the year 2018, the Nirmala Sitharam had also issued a statement that revealed: “the government does not consider cryptocurrencies as legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or a part of the payment system the government will explore the use of blockchain technology proactively for assuring in the digital economy.”
In mid-2019, a government committee had also suggested the banning of all private cryptocurrencies, with a jail term of around 10 years as well as heavy penalties for anyone dealing in digital currencies. Moreover, the Supreme court in the month of March 2020 overturned RBI’s circular, which permits banks to handle cryptocurrency transactions from the exchanges and traders.
