Crypto players seek clarity from upcoming Parliament Session

Crypto players seek clarity from upcoming Parliament Session

 

Union Finance Minister Nirmala Sitharaman slapped a 30% tax on private digital assets during the presentation of Union Budget 2022. However, the government did so despite the RBI's repeated public cautions against crypto assets. The RBI raised several concerns about private crypto currencies in its Financial Stability Report (FSR) released on December 29. It stated that the instruments had multiple major ramifications, including immediate dangers to client protection, anti-money laundering (AML), and counter-terrorism financing (CFT).

The rising popularity of cryptocurrencies, on the other hand, has enticed a wide range of youthful investors across the country. This has inspired the crypto community to think big! They have high hopes and anticipate the government adopting a more progressive and friendly crypto policy. The crypto sector has high hopes for the new Parliament session, which began on Monday. Following the budget pronouncements, the industry is seeking clarity on a number of fronts.

According to market participants, the scope of virtual digital assets (VDAs) in the Finance Bill 2022 is fairly broad based. Participants in the market would welcome clarification on key issues such as definition, taxation, and computation. The Supreme Court of India recently requested the Centre to clarify its position on whether or not cryptocurrency trade or virtual digital currencies are permitted in India.

Vinu Peter Immanuel, Associate Partner, Link Legal, had this to say:

"We expect the government to spell out the framework for the proposed digital/virtual rupee and clear the air on the legal status of the private cryptos."

Because digital gift cards, loyalty, and cashback points can be held online, it's uncertain whether they'll be taxed as virtual digital assets, he noted.

According to market analysts, a definition would prevent crypto companies from fleeing India for more attractive global crypto centres such as Dubai and Singapore, where they have established an independent regulatory authority to govern the crypto field.

Crypto experts believe that a crypto bill, which would include input from all stakeholders, is unlikely to be introduced during this Budget session. Finance Minister Nirmala Sitharaman invited crypto players to participate in the consultation process for the crypto Bill earlier this month. The government hasn't placed all of its cards on the table yet.

The government will want to take time to formulate crypto legislation because of the complexity and potential risk to investors and the economy, according to Anupam Shukla, Partner, Pioneer Legal.

"A robust legislation to regulate VDA’s has been under deliberation at least since 2017," he added.

"This regulatory uncertainty has continued to impact the crypto sector in the country."

However, the treatment of crypto transactions and the regulatory environment remain ambiguous. Government has to adopt a crypto-friendly taxation system, and the development of Central Bank Digital Currency (CBDC) holds the key.

According to Raghav Gupta, Founder of EquiDEI, Indian companies have created technologies that would enable the ecosystem flourish globally. For creators, the new prospects of FII, the global economy, and expanding capital outreach are extremely attractive.