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Overview : Cryptocurrency exchanges in India have written to RBI seeking status with banking operations and taxations, as lenders step back to involve themselves without a clear regulatory framework.
India was very uncertain regarding the cryptocurrencies since the inception back in 2012-13. The RBI had kept a close eye on the activities in domestic and International streams. Fearing for the risk to the monetary system of the country, RBI banned the banks to deal with the cryptocurrency transactions.
The Approach is Simple :
The surging level of the confusion and pertaining clouds on the regulatory framework, the Cryptocurrency exchanges have now written to the Reserve Bank of India(RBI) and sought clarity on the regulations within the country.
The Exchanges also asked to clarify the categorization of the platform as currency, goods, commodity, or service that decides its taxing criteria and figures under the Goods and Service Tax ( GST) framework.
Since the adoption of the G.S.T system, the information on the inclusion of the crypto-transactions is vague. However, the income tax department had carried out various investigations on their inclusions and aftermath impacts on the exchanges and found that a certain rate of G.S.T can be levied on them.
Praveenkumar Vijaykumar, Chairman & CEO Belfrics Global, a cryptocurrency platform concerned with the possibility of the G.S.T to be imposed said,
“If the digital assets are not exempted from GST, the digital currency exchanges in India are going to have a standoff with the tax authority. In early 2019, the tax department had reached out to several cryptocurrency platforms in this regard. In the wake of the recent Supreme Court ruling, we have also approached the RBI for clarity on this, as if we pay GST on the whole transaction, then most platforms would not be able to survive.”
Also Read: Cryptocurrency Regulations in India
RBI’s Approach on Cryptos After Ban was Scrapped
RBI’s circular on the blanket ban was revoked by the supreme court after a series of arguments. However, within a couple of days, the RBI sought for a review on the judgment to the supreme court aimed at curbing cryptocurrencies. But after two months of judgment, RBI still maintains an unclear stand on cryptos and prefers to be silent.
One of the cryptocurrency platforms, Coin Crunch had filed an RTI to seek a reply for the following queries,
- Why has the RBI not removed the circular from the website?
- Why has the Reserve Bank not notified the regulated entities of the invalidation of the circular?
- Is the RBI working on any policy for dealing with virtual currencies?
- Has RBI set up a committee to decide on CBDC- Central Bank Digital Currencies or a Virtual INR currency?
To all these queries, RBI replied with a single line mentioning Section 2(f) which defines the information that could be provided within the Act. According to RBI, the above information was excluded from Section 2(f).
Also read: Crypto Regulations in Singapore are a Step ahead from other nations
The Possible Future Actions
The analyst predicts that the Indian Government would regulate cryptocurrencies in stages. The Indian Bitcoin industry also expects more backing from the government by regulating.
On the other hand, the experts are also concerned with the government’s interference which could harm the crypto industry and blockchain development & innovation in the country.
The Indian Government in consultation with the regulatory bodies and RBI intends to regulate cryptocurrencies, with clear tax policy. However, this would consume a little time. The upcoming days will see more work on the regulations with a defined tax policy.