IndiaTech.org, an industry body, has suggested classifying cryptos as digital assets rather than currencies, as are other assets such as gold, securities, and real estate.
Given the market size and network availability, cryptocurrency is a huge opportunity for India, with tremendous potential to improve the capabilities of an economy that is already well-suited to draw crypto-related capital investments.
The association published a white paper on Wednesday that included a policy proposal for a regulatory system for crypto assets and crypto exchanges in India.
The proposed definition proposes classifying cryptocurrencies such as Bitcoin (BTC) as digital assets rather than currencies. "Define cryptocurrencies as digital assets rather than currencies, and recognize them as digital assets like gold, stocks, or marketable securities," the proposal states.
IndiaTech shares their thoughts on key risks for policymakers to consider while considering crypto, as well as recommendations on how to better solve them in order to optimize value development for all stakeholders in society.
Crypto as an asset, not a currency
The word cryptocurrency should be understood to refer to digital assets rather than fiat money. To put it another way, cryptocurrency is merely an alternative rather than a means of exchange or a unit of account; an asset class is a store of value that is used in a variety of ways around the world, including the implementation of technology in more developed market countries.
Crypto assets are not commonly used as payment instruments because their values fluctuate on a daily basis due to their deflationary existence.
Tax on Cryptocurrency
In India, there is no defined system for taxing cryptocurrency. It is now considered the same as any other investment, and capital gains taxes are imposed under the Income Tax Act. The Indian crypto community includes over ten million investors with over $1 billion in assets, a regular trading volume of $350-500 million, 300+ start-ups, tens of thousands of employees, and hundreds of millions in revenue and taxes.
Traceability of Cryptocurrency
One of the issues about cryptocurrency is that it can be used to launder money. However, this is one place where clear regulation can be beneficial - a proper KYC provision would enable the government to track down suspicious transactions. KYC at the entry and exit points where Crypto is bought from exchanges guarantees that those who buy and sell crypto assets are still traceable and accountable.
Although crypto mining is not prevalent in India, it does require a significant amount of resources, raising concerns about its global environmental effects.
On total ban
A total ban on cryptocurrency might not be the best choice, as it would encourage cryptocurrency adoption in illicit markets while also obstructing one of India's most promising avenues for global technological relevance, it said.
Instead, India should accept crypto tokens as digital assets rather than currencies, and clarify policies on exchange ownership, KYC, FATF guidance, accounting, and reporting standards, adds further.
India has a great opportunity to capitalise on the huge potential that the industry holds. The second paper offers solutions and suggestions that @IndiatechO has proposed as a 5-point framework on how the Indian #government can best regulate #Crypto while encouraging innovation.— IndiaTech.org (@IndiatechO) May 5, 2021
According to the #IndiaTechDecoder opportunities from #Crypto adoption is far more than simply attracting #FDI, with benefits including enhancing the country’s technological skillset, thereby broadening #employment opportunities.— IndiaTech.org (@IndiatechO) May 5, 2021
For understanding #Crypto better, it is important that #Crypto is viewed an #asset, not a #currency; a precise& clear #tax policy is formulated for #Crypto and uniform #KYC laws are articulated to ensure accountability. #IndiaTechDecoder— IndiaTech.org (@IndiatechO) May 5, 2021