Indian media outlets have reported about
the recently held session of the country’s parliamentary inter-ministerial
committee on
cryptocurrency.
The committee’s first session is said to have concluded on a
promising note, where a majority of the members were in favor of introducing
regulations on cryptocurrency usage, thereby offering a legal status to Bitcoin
and other virtual currencies. On the other hand, few committee members called
for a complete ban on cryptocurrency usage in the country.
According to news reports, the
positive outlook towards virtual currencies expressed by the committee members
increases the likelihood of Bitcoin and other cryptocurrencies receiving a
legal status soon. The committee has decided to focus on exploring the possible
amendments to the Reserve Bank of India Act required to assign a legal position
to cryptocurrencies.
Provided the committee successfully decides upon conferring a
legal status to Bitcoin, with suitable amendments to existing regulations, then
all cryptocurrency transactions and investments will become taxable assets. In
addition to taxation, there is also a possibility of the government imposing
strict Foreign Exchange Management Act
(FEMA) regulations against
overseas cryptocurrency investments. Bitcoin users will also be required to
meet stringent Know Your Customer (KYC) and Anti-Money Laundering (AML)
regulations.
The committee is expected to present its findings to the
parliament by mid-May, based on which the concerned ministry (Finance Ministry)
will take further action.
While assigning a legal status to Bitcoin is welcomed by India’s
cryptocurrency businesses, there are few concerns about its eventual impact on
the sector. Indian regulators have in the past gone overboard with investment
and tax regulations. If the government decides to overreach in this matter, it
could end up hampering the growth of cryptocurrency ecosystem in India.
The
government should weigh the pros and cons, make necessary allowances for the
industry’s progress while framing new cryptocurrency laws.
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