Crypto

A Financial Stability Board (FSB) report due in October will assist the government decide whether to ban cryptocurrency transactions through wallets and would establish a legislative framework for dealing with crypto trading in India, according to a senior government official.

According to the person, who spoke on the condition of anonymity, the study will include guidance on how the legal parameters of India’s cryptocurrency trading will take shape.

The FSB is also researching worldwide precedents in cryptocurrency regulation, and its report is anticipated to assist India’s legal strategy in dealing with current worries about money laundering and terror funding in the crypto trade in India.

“We are anticipating the (FSB) findings, which will be significant in terms of crypto legislation.” We also hope it addresses how to handle wallet transfers (of crypto).

Depending on the findings of the investigation, we will decide whether to prohibit wallet transfers. The law is still in the works. We made it plain when we taxed it (in Budget 2022) that legislation is still in the works. “This report would go a long way toward addressing the legislative issue,” the official said.

The FSB is developing laws to govern cross-border cryptocurrency transactions. It was established under the auspices of the G20 in 2009 by bringing together national authorities, standard-setting bodies, and international financial institutions to address vulnerabilities and develop and implement strong regulatory, supervisory, and other policies in the interest of financial stability.

India’s Status on Crypto 

India is an active member of the FSB, with three seats in its Plenary held by the secretary of economic affairs, the deputy governor of the Reserve Bank of India, and the chairman of the Securities and Exchange Board of India. To represent India’s views to the FSB, the FSDC Secretariat in the Department of Economic Affairs coordinates with various financial sector regulators and other relevant institutions.

In India, cryptocurrencies are unregulated, but the government declared in Budget 2022 a flat 30% tax on gains from cryptocurrency transactions, as well as a 1% tax on cryptocurrency and its  deducted source (TDS).

“The RBI believes it should be prohibited.” It has made its position known. The government feels that it should be taxed until legislation is drafted around it.

Taxation should not be abandoned, which is why the Budget proposed more levies. The FSB report would be useful in determining if crypto should be prohibited. And this necessitates international regulations. Only prohibiting it in India would leave the door open for cross-border transactions via wallets, according to the official.

Once a decision is made on the legality of cryptocurrency, the following step is to impose GST. Before applying GST, it must first be determined what type of asset it is—a commodity or a service. We anticipate that the report will aid in answering these questions. Those discussions are primarily ongoing and are dependent on whether we intend to legalize it or not.

RBI’s Opinion

The RBI has been outspoken in its opposition to cryptocurrencies. Governor Shaktikanta Das has often stated that cryptocurrencies are a threat to the country and that anything whose value is generated exclusively from speculation is speculative in nature. The central bank recognised several dangers associated with cryptocurrency asset markets, including links between such markets and the regulated banking sector. The RBI has previously stated that “identification and quantification of risks posed by crypto-assets suffer data gap issues.”

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By Moana Snow

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