Is there a future for Cryptocurrency in India? A look at recent discussions in Parliament

Cryptocurrency India: A look at recent discussion on cryptocurrency in parliament of India.

Is there a future for Cryptocurrency in India? There might be some if recent debates, media reports and experts opinions are to be believed. Even the Infosys non-executive chairman Nandan Nilekani recently opined that cryptocurrency could be acceptable in India as a store of value. Because he said, cryptocurrencies are not ideal for transactions in the country as India already have better alternatives (like UPI) for making transactions.

More recently, in the last week of March 2021, the government made it mandatory for companies to disclose investments made in cryptocurrencies. The move was welcomed by the crypto sector operating in the country. Experts said this move would open the door for all Indian companies to have Crypto on their balance sheets. “It will bring in a lot of transparency and will act as a comfort for Indian companies which are dealing in crypto-assets and were previously confused on how to put it in their books,” said Sumit Gupta, CEO & Co-founder, CoinDCX.

Slowly but steadily sentiments in favour of cryptocurrency is building in the country. In what form cryptocurrency would be acceptable to Indian lawmakers and regulators remains to be seen. However, the good thing for crypto lovers in the country is that discussions on this topic are not dead. Rather, they are getting louder even as cryptocurrency is not fully backed by the law. In the Parliament also, several members have been recently raising the issue of cryptocurrency/Bitcoin. In the month of March alone, at least five questions related to cryptocurrency were raised in Parliament. Here’s a look at the questions asked and the Government’s official responses:

Impact of bitcoin on regular currency (March 23)

Rajya Sabha member K.C. Ramamurthy asked whether any assessment has been made on how cryptocurrencies like Bitcoin impacts the regular currency of the country. He also asked about the details of countries that are in favour or permitting use of cryptocurrency, the countries that are opposing and the countries that have taken the middle path. Also, whether there are any plans to bring legislation to stop use of cryptocurrency in the country?

In a written reply, Minister of State in the Finance Ministry Anurag Thakur said, “The Reports of the Financial Stability Board (FSB) on Crypto-asset Markets, October, 2018 and on Regulation, Supervision and Oversight of “Global Stablecoin” Arrangements, October, 2020 bring out the probable financial stability risks arising from the crypto-assets and stablecoins.” He further said, “It is stated in the Report of FSB on crypto-asset markets that crypto-assets lack the key attributes of sovereign currencies and do not serve as a common means of payment, a stable store of value, or a mainstream unit of account.”

On the countries adopting cryptocurrency, Thakur said they can be be categorised under the four broad categories:

1. Accommodative or liberal – like in Japan;
2. Heavily regulated like in USA,
3. Not currently regulated, like in lndia; and
4. Prohibitive, like barring financial institutions within their borders from facilitating transactions involving cryptocurrencies, like in China.

With regard to the question on the Cryptocurrency ban, Thakur said the Government would take a decision on the recommendation of the high-level Inter-Ministerial Committee and the legislative proposal, if any, would be introduced in the Parliament following due process.

Regulating Cryptocurrency (March 23)

Rajya Sabha member Derek O’ Brien asked for the grounds on which Government is planning to propose a ban on cryptocurrencies. To this, Thakur reiterated that the decision will be based on the recommendation of the IMC and the legislative proposal, if any.

Watch the video of Nandan Nilekani’s views on cryptocurrency here:

Threats of cryptocurrency (March 23)

Rajya Sabha member Parimal Nathwani sought details on the threats of private cryptocurrencies such as Bitcoin to the Indian economy. He also asked whether Bitcoin is traded in the country in a clandestine manner and has come to the notice of the Government.

Thakur replied that RBI has cautioned users, holders and traders in virtual currencies (VCs) including Bitcoins regarding various risks associated in dealing with such VCs through its public notices.

Thakur also highlighted that it was announced in the Budget Speech for 2018-19 that “The Government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities or as part of the payment system. The Government will explore use of block chain technology proactively for ushering in digital economy.”.

Question on Cryptocurrency Bill (March 23)

Rajya Sabha member Priyanka Chaturvedi asked whether the Government was planning to ban cryptocurrency in India. Also, was it planning to introduce the Cryptocurrency Bill?

Thakur, while citing previous decisions of the government on cryptocurrency, said, “The Government would take a decision on the  recommendation of the IMC and the legislative proposal, if any, would be introduced in the Parliament following due process.”

Priyanka Chaturvedi also asked whether Government is currently collecting income tax on cryptocurrency earnings of Indians. To this, Thakur replied that as per the Income Tax Act, total income shall include all income from whatever source derived, the legality of income thus being of no consequence. The gains arising from the transfer of cryptocurrencies/assets is liable to tax under a head of income.

However, the government is not maintaining data on the cryptocurrency earnings of India currently.

Ban on Bitcoin trading

Rajya Sabha member Sumalatha Ambareesh asked whether illegal trading of cryptocurrency is going on in the country? Thakur replied legal position on cryptocurrency and what it is planning to do.

In all the government responses in the Parliament mentioned above, it is clear that the government is not completely against cryptocurrencies. And this augurs well for crypto lovers, at least for now.