India intends for global talk to regulate cryptocurrencies: DEA Secretary Ajay Seth

The RBI has been highly opposing private cryptocurrencies as they could have an impact on national security and financial stability.

Day after Finance Minister Nirmala Sitharaman announced in the Budget that the digital currency promoted by RBI would be a reality in 2022-23. Economic Affairs Secretary Ajay Seth opened up on India’s favours of a global consensus on operating cryptocurrencies as a local response and said it may not yield the desired results because these methods are marketed on the internet and not bound to any jurisdiction.

“Regulation or ban whatever it is, appropriate policy response to crypto-assets is in the making. How long, I am unable to put a finger on. I don’t see this happening in the Budget session for sure. The work is in progress,” he said when questioned whether the government would come out with a law on private cryptocurrencies in the current Budget session of Parliament.

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In a conversation with PTI, he said, “Whatever regulations are brought in, unless there is a global consensus they won’t succeed. It may succeed 80-90% but it will not be a comprehensive solution.” He further added that as of this time, the government is talking with several stakeholders, particularly the institutional stakeholders and not crypto stakeholders.

He further pointed out that Stakeholders who have the power on monetary policy, fiscal policy, financial stability and development economics are in conversation with authorities… and he expects that this year the discussion would be beginning in the G20 forum on the reasonable global response to crypto-assets. However, the first finance ministers and central bank governors conference of G20 under the presidency of Indonesia is slated to start on February 17. The second conference would take place in April, and the third in July.

Seth further said that two steps have been declared in the Budget — first, a central bank promoted digital currency and to promote that whatever modifications are needed to the RBI Act have been put in the Finance Act.

However, FM in her budget speech on Tuesday announced that Digital currency will help to have a more profitable yet cheaper currency management system. And, thus the government has declared to introduce a digital rupee using blockchain and other technologies to be granted by the Reserve Bank of India, beginning from 2022-23. A blockchain is approximately a digital record that records trades that can be tracked.

The second measure is in respect of tax implication related with the crypto assets, the Union budget has formulated a 30% tax on income from trades in such assets, and 1% TDS (tax deducted at source) on transactions in these investment classes above a specific limit to trace the source. Gifts in crypto and digital possession would also be taxed.

Presently, there are no particular laws or any ban on the business of private cryptocurrency in the country. The government in December had asserted its intent to bring a bill on cryptocurrency striving to “create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India” in the previous session of Parliament. However, it could not be submitted as the Cabinet had not passed the draft bill.

The RBI has been highly opposing private cryptocurrencies as they could have an impact on national security and financial stability. However, the RBI is of the suggestion that global organized action is needed and central banks should come out with digital currencies to fulfil the need of the public and curb any harm happening from the use of private digital currencies.