Consultation paper on digital assets may not lead to cryptocurrency policy

The government has also raised concern over complying with Financial Action Task Force (FATF) guidelines and discussed it with other countries, according to an official

India is unlikely to take a call to either ban or legalise crypto currencies in the near future and would rather wait for global consensus to emerge, according to a senior official.  

“We don't see much action on that (crypto). We will see a consultation paper but nothing beyond that. I think the government strategy now is to await global moves rather than take a big step in any direction,” the official told Business Standard.

Economic Affairs Secretary Ajay Seth said on Monday that the consultation paper on virtual digital assets prepared after wide deliberation with domestic as well as multilateral institutions was almost ready for release.

The government has also raised concern over complying with Financial Action Task Force (FATF) guidelines and discussed it with other countries, according to another official.

FATF standards ensure a co-ordinated global response to prevent organised crime, corruption and terrorism. They also help authorities go after the money generated from such crimes.

India, like many other countries, is currently not FATF-compliant on crypto assets. FATF requires countries to have a clear stand on legalising or banning crypto assets.

No clear signal

• Govt awaits global action to decide on crypto treatment 
• Consultation paper to seek public feedback 
• Will incorporate inputs from domestic and international stakeholders 
• Govt depts divided on banning crypto; RBI favours a complete ban
• Global economies to formulate standard regulations

The views are divided within the government departments on whether crypto currencies should be banned. The Reserve Bank of India, however, has been in favour of a complete ban on crypto assets on account of the risk associated with it.

In an interaction with a TV channel last month, RBI governor Shaktikanta Das said the central bank’s views remain consistent on virtual digital assets. 
 

“On cryptos, our position remains very clear. It will seriously undermine the monetary, financial and macroeconomic stability of India. And we stick to that position. We have conveyed our position to the government and the government will take a considered call and I think the utterances, the statements coming out from the government are more or less in sync with RBI. They're also equally concerned,” he added.

In December 2021, during the winter session of Parliament, the government listed the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, to provide a framework for digital currencies. The bill was never introduced.

Subsequently, in the Budget for 2022-23, the government had defined crypto as virtual digital assets and also imposed a 30 per cent tax on gains made from such transactions. It also proposed 1 per cent tax deducted at source on all such transactions effective from July 1. However, the government had clarified that taxation would not amount to legalising virtual assets.