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By Muthuswamy Iyer
Bitcoin’s meteoric rise has captured the imagination of investors worldwide, and India is no exception. However, the legal and regulatory landscape surrounding Bitcoin in India remains a work in progress. This article delves into the current state of affairs, explores potential regulatory milestones inspired by global best practices, and sheds light on the path towards a more certain future for Bitcoin in the Indian economy.
A Cautious Embrace: From Ban to Ambiguity
The Reserve Bank of India (RBI) initially exhibited a strong aversion to Crypto Assets, even imposing a trading ban in 2018. However, in a landmark move in March 2020, the Supreme Court overturned this ban, paving the way for Crypto Asset trading.
Despite this positive development, a comprehensive legal and regulatory framework for cryptocurrencies, including Bitcoin, remains conspicuously absent. This lack of clarity creates ambiguity for both investors and businesses, hindering wider adoption.
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A Tale of Two Technologies: Blockchain vs Bitcoin
Interestingly, while Bitcoin faces regulatory uncertainty, blockchain technology, the underlying infrastructure powering Bitcoin, is finding a foothold in India. Both public and private sectors are exploring its potential.
The Indian government itself is actively developing a Central Bank Digital Currency (CBDC) leveraging blockchain technology. This contrasting approach highlights the potential for innovation within a regulated framework.
Trading Flourishes, Utility Falters
Currently, investors can freely trade Bitcoin and other Crypto Assets on platforms that are registered as reporting entities with the Prevention of Money Laundering Act (PMLA) and Know Your Customer (KYC) norms.
However, the utility of Bitcoin as a form of payment remains limited. Concerns surrounding potential disruption to the traditional financial system and a lack of widespread acceptance by businesses restrict its real-world application.
Regulations on the Horizon: Taxation and Beyond
While India doesn’t explicitly prohibit owning or trading Bitcoin domestically, there may be other regulations which may govern the transfer of Crypto Assets from India to other jurisdictions. Recognising its growing presence, the government took a significant step forward with the 2022 Finance Act and CBDT guidelines.
These classify cryptocurrencies as Virtual Digital Assets (VDAs) subject to a 30 per cent tax on income earned from their transfer. This move suggests a potential shift towards a more regulated crypto environment.
Learning from Global Leaders: A Model for Success
India can get valuable insights from countries like Singapore and Japan. Both have established clear and well-defined regulatory frameworks for cryptocurrencies. These frameworks strike a balance between encouraging innovation and managing risks associated with Crypto Assets.
Singapore, for instance, has emerged as a global hub for crypto businesses due to its progressive regulatory approach. By adopting a similar approach, India can create a regulatory environment that fosters responsible innovation and attracts investment in the crypto sector.
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The Road Ahead: A Brighter Future Beckons
It is expected that in India there will be domestic regulations specifically targeting Crypto Assets shortly. This, coupled with the possibility and hope of reduced crypto taxes in the upcoming budget, paints a cautiously optimistic picture for the future of Bitcoin and other Crypto Assets in India.
A well-defined regulatory framework will provide much-needed clarity for investors and businesses, paving the way for wider adoption and responsible integration of Crypto Assets into the Indian financial ecosystem.
Bitcoin’s journey in India has been marked by both promise and uncertainty. While the legal landscape remains ambiguous, recent developments, including the introduction of crypto taxes and the government’s exploration of a CBDC, suggest a potential shift towards a more mature regulatory environment.
By learning from global best practices and fostering innovation within a well-defined framework, India can chart a course for Bitcoin and other cryptocurrencies to play a meaningful role in the nation’s technological advancement and last-mile financial inclusion.
(The author is the Head of Compliance at WazirX)
Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.
Read More: Cautious Embrace: State Of Bitcoin’s Regulatory Clarity In India
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