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The upcoming discussion paper comes after G20 member countries last year agreed that each country should individually assess risks and potential use cases associated with digital assets.
India is reportedly set to release a discussion paper regarding its policy stance on cryptocurrencies before September 2024. However, the move does not imply an immediate shift towards comprehensive crypto regulation. During an interview, Department of Economic Affairs (DEA) secretary Ajay Seth revealed that the upcoming discussion paper aims to foster a consensus among stakeholders rather than focusing on a regulatory framework for digital assets.
This inter-ministerial group of stakeholders includes the country’s central bank, the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Internet and Mobile Association of India (IAMAI).
Seth explains that the document would present various issues for stakeholders to consider and provide their views on. Meanwhile, an unnamed senior official from the Finance Ministry, who spoke on condition of anonymity, revealed that the draft for the paper is ready.
It is important to note that the RBI has always been resistant to legitimizing cryptocurrencies and stablecoins, arguing that these digital assets pose risks to macroeconomic stability. On the other hand, SEBI seems to favor regulating digital assets.
Crypto Regulation in India
India currently does not have a comprehensive regulatory framework. However, the government imposes stringent taxes on the sector, including a 1% tax deduction at source (TDS) on crypto transactions. Moreover, it also imposes a flat 30% tax rate on crypto gains, with no loss offsetting.
Interestingly, this strict tax framework has met with heavy criticism by Indian investors and industry leaders, who believe that such steps could severely impact the country’s innovative front.
The country’s Finance Ministry also mandates crypto entities, like exchanges and lenders, to register with the Financial Intelligence Unit to comply with anti-money laundering (AML) rules and terrorism financing standards.
In 2022, India’s Finance Minister Nirmala Sitharaman also announced a Central Bank Digital Currency (CBDC), known as the digital rupee (e₹). The central bank launched a retail CBDC pilot in December 2022. This program is backed by the State Bank of India, Yes Bank, ICICI Bank, and IDFC First Bank. There is no official announcement regarding the end date of the CBDC pilot and a full launch.
Prime Minister’s Stance
The upcoming discussion paper comes after G20 member countries last year agreed that each country should individually assess risks and potential use cases associated with digital assets. In the meeting, India prioritized the consensus-based framing of global crypto rules.
As G20 president, India’s Prime Minister Narendra Modi stressed the need for a global framework to regulate cryptocurrencies, citing their global impact and potential risks. He has also underscored the need to address macroeconomic challenges associated with cryptocurrencies, such as market volatility, illicit activities, and environmental impacts.
Despite the government’s tough stance towards the cryptocurrencies, the citizens are known for their enthusiasm for the sector. A 2022 report by KuCoin revealed that India had 115 million crypto investors, representing 15% of the population, mainly aged between 18 and 60.
