The Indian government maintains a cautious stance on cryptocurrency despite Bitcoin’s surging value. At the India Today Conclave held recently, Union Finance Minister Nirmala Sitharaman highlighted the dangers associated with unregulated crypto. She emphasised the risk of illicit activities such as terror funding and drug financing due to inconsistent regulation across nations.
In this piece, we delve into the Finance Minister’s remarks regarding cryptocurrency’s classification as an emerging asset class, examine the sentiments of crypto players, and address India's ongoing stringent stance towards cryptocurrencies.
In response to a query on the resilience of Bitcoin, Sitharaman said that the government’s consistent stance has been that assets formed under the umbrella of cryptocurrency can serve various purposes, such as trading, speculation, profit generation, and more.
“We haven’t regulated them, and then we haven’t regulated them even now. But they cannot be currencies is what I’ve always held, and that’s the government of India position. Currencies are to be issued with the fear of the government or the central bank, so that is a different story. So if they're coming back, this resurgence, that is the asset which is being created for speculation or for trading or for whatever purpose, and it is still unregulated in India. And that is why we thought it fit to raise it in the G20 forum because as it is so technology driven and it will have a bearing on cross border payments and so on if one country regulates and others don't, it will be an easy way of moving money around tripping or funding drugs or even terrorism and so on. So we wanted to create a kind of a framework by taking it to the level of G20. It has been very well received and I'm sure there will be some framework emerging,” FM said.
Despite approaching cryptocurrencies with caution, it's important to consider the perspectives of crypto players.
Sumit Gupta, Co-founder of CoinDCX
“Across the world, people are seeing crypto as a store of wealth – a credible and future-ready asset class that is helping them protect their wealth and hedge their investments. We have been aligned with the Government and agree with FM's statement that crypto cannot be treated as a currency. We have always maintained that Crypto is an asset class and this our request has always been to get regulatory clarity from that perspective. Additionally we should also understand the value that this technology is bringing. This was also made evident by recent statements made by SEBI Chairperson and Uday Kotak when he drew attention to the emergence of alternate market and how it is being legistimised by US, UK and Europe as a major part of their future. Given that crypto developments are agnostic of geography, it will require the coming together of global policymakers to thoroughly regulate and more effectively safeguard the interest of consumers. Global cooperation is not only needed but is critical given the rapid pace at which crypto is developing as well as the transboundary nature of the asset. Rather than having multiple jurisdictions working in silos towards a common end, the advantages of global cooperation include shared resources, purposeful knowledge exchange and accelerated learning towards an optimal regulatory framework by reducing regulatory arbitrage.”
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Rajagopal Menon, Vice President at WazirX
“Traditionally, crypto has been viewed with suspicion by the Indian establishment because they were worried about the crypto becoming a parallel currency to the Indian Rupee. The Indian crypto industry is very clear - we are not interested in becoming an alternative payment platform. It simply does not make sense because Indian payment systems are the most advanced in the world, in the first quarter of FY 2023–24, transaction volume reached 24.9 billion and transaction value reached Rs 39.7 trillion. Our request has been to tread cryptos like an investment - an asset or a security. The government has also taken a practical view - introducing taxation and then bringing crypto under FIU. We are hopeful that once the new government takes office, we will see regulation take shape as India is a signatory to the Delhi declaration which makes in mandatory for G20 countries to have regulation in place by 2025.”
Rahul Pagidipati, CEO of ZebPay
“The Indian government’s stance on Virtual digital Assets (VDAs) has remained largely unchanged since the taxation rules were announced. While this has had a dampening effect on industry participation, both from an investment and innovation perspective, it is a progressive step towards regulation which is the need of the hour. We are hoping that the conversations initiated at the G-20 summit will lead to fruitful outcomes with the international community now closely involved in developing a technology-driven regulatory framework. Moreover, a reduction in capital gains taxes and TDS will encourage increased participation from both retail and institutional investors, paving the way for sustainable industry growth.”
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Ashish Singhal, Co-founder, CoinSwitch
“India’s response to crypto is very nuanced and thoughtful. As the Finance Minister recently reiterated, the existing rules consider crypto as a virtual digital asset and not a currency. India is right on this approach. In India, users trade on VDAs for capital gains. He or she does KYC,pays advanced taxes where applicable, and pays taxes on profits made on VDA. This is to say, an Indian user treats crypto as any other investment instrument in his or her portfolio. CoinSwitch is in agreement with this: We view crypto as an asset class for wealth creation. That said, we would like to see taxation on crypto to come down so it is at par with other asset classes. There is no demand for the currency use cases of crypto in India. Currency is a sovereign prerogative, and India's payment infrastructure is sufficient and even ahead of much of the world. The Government's approach to crypto should be seen in this light: It has clarified the processes and guidelines a user and a platform have to follow on use of crypto as a VDA, while protecting its sovereign interest.”
Kumar Gaurav, Founder & CEO of Cashaa
"The views expressed by the Finance Minister of India may seem discouraging at first glance, but if you delve deeper into what’s been said, it is apparent that bringing regulation to the crypto market is very much in the thoughts and works of the government. The government wants to treat cryptos as an assets class, an investment vehicle for wealth creation and not as a substitute currency. We welcome this approach, at least in the short to medium term. Regulation will bring about clarity, certainty and trust in cryptocurrencies not only for the average Indian user but also for crypto companies and investors. This coupled with rationalisation of the TDS and capital gains taxes on cryptos can usher in a new era of innovation and growth in the crypto market in India, which can also spur economic growth for the nation."
