TronWeekly

Crypto World News

You are here: Home / Archives for indian government on cryptocurrency

indian government on cryptocurrency

Indian Crypto Exchange WazirX Issued Notice For “Mysterious Transactions”

by

Indian crypto platform WazirX has been served a show cause notice [SCN] for allowing outward remittance of crypto assets to the tune of 2790 crore to unknown wallets, the Ministry of Finance told the Upper House on August 2. 

The exchange is currently under the scanner of the nation’s law enforcement agency- The Directorate of Enforcement [ED] which is investigating two cases against the former under the provisions of the Foreign Exchange Management Act, 1999 [FEMA],

The first case is about Zanmai Labs, which operates WazirX, for using the walled infrastructure of Binance. Secondly, the agency accused the platform of allowing foreign users to convert one crypto into another by using transfers from third-party exchanges namely FTX, Binance, etc.

Further, it has been found that all crypto transactions between these 2 exchanges were not even being recorded on the blockchains and were thus cloaked in mystery. Accordingly, a show cause notice (SCN) has been issued under the provisions of FEMA against WaxirX for allowing outward remittance of crypto assets worth Rs 2,790 crore to unknown wallets.

Last month ED also sent out notices to a number of exchanges including WazirX to seek details about customer transactions.

WazirX Was Fined $5 Million For Alleged Tax Evasion

Last year, the Goods and Services Tax [GST] Department started probing into the activities of cryptocurrency exchange WazirX for allegedly evading Rs 40.5 crore in tax. The authorities said it recovered Rs 49.2 crore from the firm – the GST owed plus interest and penalties.

The indirect tax department revealed that WazirX issued its own cryptocurrency- WRX coins through Zanmai Labs without paying GST on it.

At that time, a spokesperson denied the allegations saying that they have been paying GST every month and there seems to be ambiguity around the tax framework.

As reported by TronWeekly, Indian Finance minister Nirmala Sitharaman stated in Parliament that a decision of banning or regulating crypto assets will only take place after proper consultation with global stakeholders weighing on the risks and benefits.

In a written response, Sitharaman said this is to prevent ‘prevent regulatory arbitrage.’

The latest development comes at a time when the Indian crypto industry is struggling with new taxation rules and a massive drop in its daily trading volumes.

India’s FM-“Crypto Regulation Or Ban Only After Global Support”

by

Indian Finance minister Nirmala Sitharaman stated in Parliament that crypto regulation or banning is effective only after proper consultation with global stakeholders weighing on the risks and benefits.

In a response to a query in the lower house, Sitharaman wrote that the Reserve Bank of India [RBI] has recommended to the government that it should bring cryptocurrencies under the regulatory ambit and prohibit them.

“In view of the concerns expressed by the RBI on the destabilizing effect of cryptocurrencies on the monetary and fiscal stability of a country, the RBI has recommended for framing of legislation on this sector. The RBI believes that cryptocurrencies should be prohibited,” the finance minister replied in the Lok Sabha.

Sitharaman then proceeded to add the necessity of international collaboration to prevent any kind of exploitation of regulatory loopholes, given that cryptocurrencies are not bound by any border.

Crypto proponents in India were eagerly waiting for the bill to be presented during the Monsoon Session of Parliament that began today. However, no such bill has been listed for introduction as of now.

That said, the Indian govt’s continuous ambiguity has left industry top players frustrated.

India’s Crypto Bodies Divided Over Govt’s Stance

Differences have cropped up in India’s two main crypto groups over the government’s stance toward crypto. After the Internet and Mobile Association of India [IAMAI] dissolved The Blockchain and Crypto Assets Council or BACC recently.

The industry players are now planning on creating a new body.

Members of BACC felt that IAMAI was reluctant to push their cause, in terms of compliance with government regulations.

“We feel that IAMAI is trying to distance themselves from crypto as they feel the government is not in favor of private digital currencies,” a BACC member said.

Apart from that only the top 4-5 crypto firms contributed the major funds to BACC, which proved costly at times of low trading volumes due to the draconian tax structure.

“It was a costly association and there wasn’t any ROI for an industry which is under severe cost pressure,” said a crypto exchange CEO requesting anonymity.

On the other hand, IAMAI in a statement said it has decided to disband BACC since its advocacy does not align with IAMAI’s long-term objectives. IAMAI added it would continue to support the Indian government’s CBDC initiatives.

Indian Parliamentary Panel Unhappy Over Crypto Stakeholders’ Focus On “Advocacy”

by

Indian Finance Committee met key players in the crypto industry in Bengaluru on May 6. According to sources, the meeting did not turn fruitful as members of the finance body were apparently dissatisfied with the industry’s emphasis on “advocacy” instead of chalking out a plan to deal with risks like terrorism financing, for instance.

As per local sources, the parliamentary panel reportedly asked industry representatives to address its concerns on mitigating cross-border terrorism and money laundering. Besides that, it also requested members to present a model for regulation, and names of crypto-related firms.

In the meeting, the Committee stressed that the main focus should be on overall regulatory policy rather than individual industry concerns about new tax rules.

art rachen 2ipicd3G G8 unsplash
Indian Parliamentary Panel Unhappy Over Crypto Stakeholders' Focus On "Advocacy" 2

“They haven’t done anything since the last time we raised concerns. It’s the same old thing. That’s what we chided the industry for. We are sick and tired of hearing advocacy, advocacy. Because they have to address the challenges that the government is putting forth, right? Plans, mitigation measures, or some kind of thing. I think that would go a long way,” an official present at the meeting remarked.

Tougher days ahead for Indian crypto exchanges

Its been quite an eventful month for the Indian crypto market. Since the tax came into effect, trading on digital asset exchanges in India took a nosedive, and to top that banks refuse to transmit payments to exchanges due to regulatory uncertainty. 

In general, we have seen trading volumes [on Indian exchanges] come down by 30%-40% in the last two to three weeks,” Nischal Shetty, founder, and CEO of WazirX, India’s biggest cryptocurrency trading exchange told in an interview.

Amid the sharp fall in the numbers, WazirX hinted at relocating its operations overseas, especially in Dubai.

However, it is not only WazirX that is reported to move out of India. The stringent tax rules have driven crypto talent to flock to friendlier regimes, with a few hoping things to improve soon.

Previously TronWeekly reported on Indian Tax authorities exploring ways to bring income generated from crypto platforms operating outside India under the lens, sources familiar with the matter said.

Will India’s 30% Crypto Tax With No Offsets Spell Doom?

by

India’s crypto policy seems to provide no respite for investors. On 21st March, the Ministry of Finance [MoS] Pankaj Chaudhary made it clear that crypto investors will not be allowed to set off losses incurred from one cryptocurrency against the gains from another crypto asset. Chaudhary was responding to questions during the Lok Sabha session [lower house of the Parliament]. The written statement read,

“As per the provisions of the proposed section 115BBH to the Income-tax Act, 1961, loss from the transfer of virtual digital asset [VDA] will not be allowed to be set off against the income arising from transfer of another VDA.”

For instance, if an investor loses Rs 500 in Bitcoin and gained Rs 800 in Ethereum in two separate transactions, he/she would still be taxed at 30 percent [Rs 240] on Rs 800. In case the investor was allowed to set off his/her loss in Bitcoin against his gains in Ethereum, he/she would have been taxed on Rs 300.

The announcement was initially made by Finance Minister Nirmala Sitharaman in her budget speech as she proposed a 30 percent tax on capital gains from crypto assets with effect from April 1, 2022. . Sitharaman had also proposed a 1 percent tax deducted at source [TDS] on proceeds of all crypto transactions.

One can check out TronWeekly‘s report on the concerns raised by experts on the TDS structure.

India’s Crypto Advocates Laments On The Harsh Policies

Nischal Shetty, CEO, WazirX feels that ‘Treating profits and losses of each market pair separately will discourage crypto participation and throttle the industry’s growth.’ Terming the news as ‘very unfortunate’, the exec appealed for reconsideration.

“It’s a continued effort to isolate and disincentivize cryptocurrency-related activities in India. The prevention of offset between different cryptos will probably negatively impact many traders,” said Rohinton Sidhwa, Partner, Deloitte India.

Recently, sources revealed that the Indian Government is planning to bring cryptocurrency under the ambit of goods and services tax [GST]. An official wishing to remain anonymous said “If that happens, the tax rate could range from 0.1 to 1 percent. So the priority would be to classify the digital assets category first and then discuss its tax rate.”

India publishes Crypto Ad guidlelines

by

India’s advertising authority has come down hard on adverts for cryptocurrency-related products and services, which have inundated television screens in recent months touting quick money, simple trading, stable returns, and more.

The Advertising Standards Council of India (ASCI) has published regulations for commercials including crypto or virtual digital assets. These guidelines will take effect on or after 1 April 2022. After 15 April 2022, all previous advertisements must adhere to the new criteria or be removed from the public domain.

Furthermore, to develop the standards, the ASCI stated it undertook thorough consultations with various stakeholders, including authorities and the virtual digital asset business.

  • All advertisements for VDA (virtual digital asset) products, VDA exchanges, or featuring VDAs must include the following disclaimer: “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.”
  • Consumers link the phrases “currency,” “securities,” “custodian,” and “depositories” with regulated commodities, hence the words “currency,” “securities,” “custodian,” and “depositories” must not be used in ads of VDA products or services, as per the rules.
  • The rules also demand that data on the cost or profitability of VDA products be clear, precise, sufficient, and stay updated. “Zero cost,” for instance, must encompass any charges that the consumer could properly connect with the product or activity.
  • In order to ensure that data on previous operations are not supplied in any incomplete or biassed manner, the guidelines provide that “returns for periods of less than 12 months shall not be included” in advertisements.
  • Several crypto-related adverts, according to India’s advertising commission, don’t really appropriately communicate the hazards involved with such items.

India attempts to stop misleading advertising on cryptocurrency

In November 2021, Indian Prime Minister Narendra Modi convened a meeting with the RBI brass and the Ministries of Home Affairs and Finance to discuss the supervisory prospects for cryptocurrencies, and a strong common ground was achieved to halt “attempts to mislead the youth through over-promising & non-transparent advertising.”

Screenshot 20
Indian Prime Minister Narendra Modi

In perspective, considering the marketing for cryptocurrency exchanges and trading on their platforms saturating the nation, especially during recent cricket matches, the government was likely to introduce some policy structure to bring them in and secure investors from losing their money.

79% of Indian population longing for Government to Regulate Focus Around Crypto & NFTs

by

A Pre-budget expectation survey by Grant Thornton showed a growing demand for increasing regulatory focus on the cryptocurrency sector by the Indian government. Approximately 79 percent of respondents believe that the focus of Budget FY23 should be on regulating cryptocurrencies and NFTs.

Vivek Iyer, a financial services partner at Grant Thornton Bharat stated:

“The market survey clearly demonstrates the expectation for the government to be forward-looking by focusing on initiatives around evolving risks, that help strengthen stability and growth of the financial services ecosystem”

Why are pre-budget expectation surveys necessary?

During the budget session, policies, incentives, and taxation are introduced that are critical to the upliftment of sectors and their growth. As the Indian economy grapples with the effects of the pandemic as well as other external issues, appropriate government actions might bring much-needed reassurance.

Another budget expectation is the much-needed clarity for taxation around crypto. The present regulations under Indian tax laws do not apparently mention crypto as a source of revenue. Tax experts only draw comparisons in connection to taxability based on broad learning of the nature of transactions and understanding of provisions under the tax laws and numerous court precedents.

In the lack of formal regulations governing cryptocurrency taxes, the taxation of cryptocurrencies may have to be decided based on the intent of the person engaging in bitcoin transactions. Gains from crypto transfers are either categorised as “business income” or “capital gains,” with residual revenue from other sources.

What lies in store for the future of crypto in India?

Ever since crypto became the talk of the town in India, the country has always been dubious about speaking about crypto and its regulation. Legalities around crypto have always seen a red flag where the country is in a puzzle as to whether ban or regulate it.

According to news sources, the government intends to regulate cryptocurrency transactions through the ‘Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.’ While regulating cryptocurrencies will give a legal framework, the forthcoming budget is likely to clarify their taxability and provide assurance and direction to crypto investors before they invest.

While the government works on it, we can hope for the best, stay educated, and stay away from scams.

India’s PM Modi pushes for collective action on cryptocurrency

by

India’s Prime Minister Narendra Modi at the recently held World Economic Forum pushed for a ‘collective and synchronized global action’ in terms of regulating blockchain-backed digital currencies. Speaking through a video conference at the Davos Agenda 2022 event, Modi deemed cryptocurrency as a challenge to the changing global order and compared it with supply-chain disruption, inflation, and climate change.

“The way technology is related to it [cryptocurrency], any decision taken by a particular country will not be adequate to resolve the challenges it poses. We need to keep a uniform thought process on it.”

The latest call for a joint effort comes after the end of the Parliament’s winter session, where a cryptocurrency bill scheduled to be listed did not make it as expected.

In a brief recall, the Indian administration, as per sources, has been working on a regulatory framework for digital assets for quite some time. The bill titled “The Cryptocurrency and Regulation of Official Digital Currency” could not be introduced due to reasons unknown. As per the latest reports, the government is planning to have wider consultations on the matter and the PM will reportedly take the final decision on it.

The Reserve Bank of India [RBI], has maintained its stance on imposing a blanket ban. In its recent meeting of the central board of directors, RBI reiterated that a partial ban would not work. The Indian crypto industry is currently seeking clarity especially in the case of taxation in the Union Budget 2022-23. 

It needs to be mentioned that, at the beginning of the year, India’s Directorate General of GST Intelligence [DGCI] has raided the premises of several crypto exchanges operating in the country after detecting tax evasion by Binance owned exchange WazirX. Following which the trading platform blamed the ‘ambiguity in the interpretation of one of the GST components’ as the reason for the miscalculation in taxes paid.

So far in India’s crypto scene

That being said, many new developments have taken place ranging from launching its first-ever crypto index to the nation’s Bitcoin ETF.

India’s first crypto Index dubbed IC15 debuted on the super-app CryptoWire two weeks ago. Following suit after the US approved Bitcoin Exchange Traded Funds [ETF], India to soon get ETFs for Bitcoin and Ethereum, as per reports. In fact, according to The Financial Express, Torus Kling Blockchain IFSC, has signed a memorandum of understanding [MoU] with India INX to roll out the country’s first cryptocurrency ETF.

Cryptocurrency bill opposed by more than a third of urban Indians

by

According to data collected by market researcher YouGov on the Indian cryptocurrency bill, more than a third (36%) of urban Indians oppose the Government’s plan to regulate crypto assets.

It has come to light that among the opposers the rate of people who own a digital asset is higher than that of those who don’t. As per the survey, approximately the ratio is around 52% to 28%.

Among the opposers of the bill, of the crypto investors, 27% of the distress over the bill is about the expensive taxation policy and around 26% of total worry about the ban on other private currencies that they have invested in so far. Some of them (23%) are scared of losing their investments in the assets; only 1 in 10 are glad about the legalization of the crypto market.

This Bill that is yet to get a nod from the Indian government, has been constantly receiving a lot of indecisiveness from its people, it almost leaves its people disoriented and agitated.

Indians’ cryptocurrency investments to stall until market stabilization

With so many frivolous opinions among the holders, further investments seem like a very unlikely move. When surveyed about future investments, more than half (51%) of the present asset holders have said that they will hold their further plans of investing in crypto until the market stabilizes.

One in six people has affirmed to stop investing and instead sell their digital assets, while a few others (4%) have decided to move on to other investment tools. While the majority of them (26%) have decided to stay optimistic and continue or increase their stakes in crypto.

Furthermore, among the optimistic bunch, three in five (60%) believe in an elite forthcoming of Cryptocurrency and think a faster adoption of the asset will put them at advantage. Nearly 45% of the bunch conceive it to be a favorable long-term investment, but others (35%) are willing to expand their investments.

With so many events and data coming to light, the anticipation of the ‘Indian Cryptocurrency Bill’ makes it all the more analytical and inquisitive. The bill is set to be up for discussion in the next session of the Indian parliament, ideally around late January or early February of 2022.

India’s crypto exchanges might be asked to appoint a Grievance Officer: Industry Insider

by

In the latest development, India’s crypto exchange maybe ask to appoint a local point of contact, similar to the new IT rules that require to have a Grievance Officer for social network entities operating in the country. This was revealed by industry insider Aritra Sarkhel, Director at Public policy and Government Affairs on WazirX.

Sarkhel has been a part of the discussion group with the government about the crypto bill, revealed in a webinar session about the Indian government’s keen interest in appointing a grievance exec who would be working to resolve complaints and queries as and when needed. This would further open up job opportunities for lawyers as there are at least 15 homegrown crypto exchanges in the country, like WazirX and CoinDCX, as well as foreign trading firms, like Coinbase and CrossTower, who have shown interest in setting up offices in India.

Further in the discussion, Sarkhel said that other aspects of the blockchain world aren’t quite on the government’s radar yet.

“Listen, nobody is discussing the metaverse at the highest quarters. We’re discussing cryptos and exchanges and NFTs, a little bit. I don’t think people are discussing the metaverse.”

The main focus of the administration has been understanding the differences between traditional and crypto trading platforms and how they function. Dwelling more, the industry expert revealed that the government is working to figure out the inflow and outflow of money in users’ wallets and ‘what sets one cryptocurrency apart from the next.’ With regards to non-fungible tokens [NFTs], most of the conversation revolves around how they should be taxed as HODLer of digital art, as a buyer, or as a creator.’ Having said that, the Indian crypto scene has not witnessed any significant developments so far.

India’s much anticipated crypto bill deferred

India’s much-awaited cryptocurrency bill is unlikely to be tabled in the ongoing session of Parliament as the government is yet to finalize details of the legislation, according to sources close to the government. As a matter of fact, the schedule for the last week of the Parliament session has left out the crypto bill from its list of business. However, the government can still introduce the legislation during the ordinance [a temporary law made by the president] in periods when the parliament is not in session.

Cryptocurrency bill discussion delayed; Indian government does not want to rush on the law

by

The cryptocurrency bill that was ideally scheduled to be discussed in the Indian Parliament today has been delayed, this procrastination was a foreseen one. The other probability for the discussion of the bill and the cabinet approval would be the last day of the winter session, 22 December 2021.

It seems like the most awaited bill in India, the Cryptocurrency bill, might not be discussed in the parliament until the next session begins, which might be around late January or the beginning of February. The government doesn’t want to rush on the law, according to NDTV.

More likely changes in the Cryptocurrency bill

According to the Media cited sources, there might be more changes to the anticipated bill. They have also stated that the Central Government of India (GOI) might consider bringing in more ordinances or a special order after the session.

Since there are 5 Indian states that are slated for elections, it is guesstimated that the ordinance for the crypto bill will be discussed after the elections. GOI conjectures its cryptocurrency regulations to be in accordance with the global framework.

This bill allows cryptocurrency as only an asset and completely ban the use of it as currency or payments. It also proposes an establishment of a framework to record, share and synchronize transactions, and to set the foundation to create a new digital currency to be issued by the Reserve Bank of India (RBI) and regulated under the RBI Act.

The cryptocurrency bill scouts to reduce the financial stability risks by guarding the former financial sector from crypto assets. The Bill also discusses that the crypto regulator will be the RBI and it will be regulated by the market regulator, Securities, and Exchange Board of India (SEBI). It also proposes to prohibit all other private cryptocurrencies in India and to facilitate regulation.

India has a high size of crypto assets in India that is about ₹45,000 crore with 15 million investors. This gives hope the GOI can announce an ordinance even before presenting a bill if the need arises.