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Cryptocurrency: Navigating the Regulatory Landscape in India - Prof. Virat, Summaries of Finance

An overview of the current state of cryptocurrency regulation in india. It discusses the government's stance on cryptocurrencies, including the recent introduction of a 30% tax on gains from cryptocurrencies and a 1% tax deducted at source. The document also highlights the global trend of requiring digital-asset platforms to follow anti-money laundering standards, and the need for international collaboration to address the challenges posed by the borderless nature of cryptocurrencies. Key developments, such as the application of anti-money laundering legislation to crypto trading and the potential implications of central bank digital currencies (cbdcs) on the international monetary and financial system. Overall, this document provides valuable insights into the evolving regulatory landscape surrounding cryptocurrencies in india and the global context.

Typology: Summaries

2022/2023

Uploaded on 05/25/2024

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CRYPTOCURRENCY: WAY FORWARD (FINQUEST)
India has already taken a major step in legalization ofcryptocurrency. There has been a
new circulation that all kinds of digital currencies and non-fungible tokens that are used
for transaction, money-laundering, need tocomply with the Prevention of Money-
Laundering Act 2002 i.e.; they need to follow up with the ‘know your customer’ (KYC)
system, keep a record of all transactions and reports with the assigned authority.
One of the companies thatprovidesthe user with their own digital wallets isCRYPQUE,
aBlockchainand Web3.0 based company. The companyis developingan application
calledCRYP, which is a crypto-payment application.
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.
A gazette notification, the Finance Ministry said the anti-money laundering legislation
has been applied to crypto trading, safekeeping and related financial services. After this,
Indian crypto exchanges will have to report suspicious activity to the Financial
Intelligence Unit India (FIU-IND).The move is in line with the global trend of requiring
digital-asset platforms to follow anti-money laundering standards similar to those
followed by other regulated entities like banks or stock brokers.
Virtual digital assets were defined as any code or number or token generated through
cryptographic means with the promise or representation of having inherent value.
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.”
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CRYPTOCURRENCY: WAY FORWARD (FINQUEST)

 India has already taken a major step in legalization of cryptocurrency. There has been a new circulation that all kinds of digital currencies and non-fungible tokens that are used for transaction, money-laundering, need to comply with the Prevention of Money- Laundering Act 2002 i.e.; they need to follow up with the ‘know your customer’ (KYC) system, keep a record of all transactions and reports with the assigned authority.  One of the companies that provides the user with their own digital wallets is CRYPQUE, a Blockchain and Web 3.0 based company. The company is developing an application called CRYP, which is a crypto-payment application.  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.  A gazette notification , the Finance Ministry said the anti-money laundering legislation has been applied to crypto trading, safekeeping and related financial services. After this, Indian crypto exchanges will have to report suspicious activity to the Financial Intelligence Unit India (FIU-IND).The move is in line with the global trend of requiring digital-asset platforms to follow anti-money laundering standards similar to those followed by other regulated entities like banks or stock brokers. Virtual digital assets were defined as any code or number or token generated through cryptographic means with the promise or representation of having inherent value. 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.”

 Recently The G20 members said to closely monitoring the risks of the fast-paced developments in the crypto-asset ecosystem. They endorse the Financial Stability Board's (FSB's) high-level recommendations for the regulation, supervision and oversight of crypto-assets activities and markets and of global stable coin arrangements.  We welcome the shared FSB and SSBS workplan for crypto assets, the declaration said.  Members also shared that the Finance Ministers and Central Bank Governors will discuss taking forward the Roadmap at their meeting in October 2023. We also welcome the BIS Report on The Crypto Ecosystem: Key Elements and Risks  Discussions were also held on the potential macro-financial implications arising from the introduction and adoption of Central Bank Digital Currencies (CBDCs), notably on cross-border payments as well as on the international monetary and financial system.

LINKS

https://bfsi.economictimes.indiatimes.com/news/industry/dpi-digital-economy-cryptocurrency-key- takeaways-from-g20-summit-2023-consensus/103536119#:~:text=The%20G20%20members%20said %20to,of%20global%20stable%20coin%20arrangements. https://www.forbes.com/advisor/in/investing/cryptocurrency/crypto-bill/ https://www.thehindu.com/sci-tech/technology/finance-ministry-imposes-money-laundering- provisions-on-cryptocurrencies/article66595663.ece