Finance Minister Nirmala Sitharaman on February 13 said the emerging new techs like crypto assets and Web3 are borderless and require major collaboration on a global level for making specific legislations. "Whether it is the crypto mining, asset or transaction, we recognise that it's completely driven by technology and a standalone country's effort in controlling and regulating it is not going to be effective," the FM said in the Lok Sabha.
The FM's comments on crypto come amid speculations that the government could come up with a strict law against crypto in India. According to the FM, currently, there are no specific regulations for these sectors. "By definition, these sectors are borderless and require significant international collaboration for any specific legislation on these sectors to be fully effective."
She said the Ministry of Electronics & Information Technology (MeitY) has released the National Strategy on Blockchain, which provides strategies and recommendations for the Indian blockchain ecosystem to harness the benefits of this emerging technology by focusing on technological and administrative aspects.
The FM said the country aims to discuss the laws related to the crypto industry during G20 meetings. "In the G20, we're raising it and having detailed discussions with members so that a standard operating protocol emerges which results in a coherent, comprehensive approach where all countries work together in bringing some regulation."
She said the RBI has launched a pilot of retail and wholesale use of digital currency. "Several sandbox mechanisms have been created to test and after understanding how the use of digital currency will have spillovers, action has to be planned."
On the issue of TDS on crypto, the FM said the tax is imposed on those who make, sell or buy crypto assets. "Through TDS, we are trying to keep an eye on money transactions so that it cannot be used for funding terrorist activities or drugs. The purpose of TDS was to trace the money trail."
The FM said the government is cognizant of the emergence of the technologies related to Web3 and Blockchain and has been taking steps to create awareness and the ecosystem building around Web3. "During Digital India Week in July 2022, MeitY organised a panel discussion on “Metaverse and Web3”. Further, the government of India is supporting the industry in organising conferences on Web3 and related technologies for understanding the ecosystem and their challenges."
She said the RBI has been cautioning users, holders and traders of virtual currencies (VCs) that dealing in such assets has "potential economic, financial, operational, legal, customer protection and security related risks". On the steps taken by the Centre, the minister said the RBI has advised its regulated entities to continue to carry out customer due diligence processes for transactions in virtual currencies, in line with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT), obligations under Prevention of Money Laundering Act (PMLA), 2002, etc. in addition to ensuring compliance with relevant provisions under Foreign Exchange Management Act (FEMA) for overseas remittances.
The Union Budget 2023 made no changes to the existing crypto tax, leaving Indian crypto stakeholders confused about its future. There is lingering uncertainty because of high taxes and a lack of a solid regulatory framework. "We hope that the government will reconsider its position on crypto taxes and work with the industry to create a regulatory framework that supports and encourages growth. With the right support and guidance, the crypto industry can play a major role in driving innovation, job creation, and achieving the 5 trillion dollar economy dream of an Atmanirbhar Bharat," said Rajagopal Menon, vice-president, WazirX.
During her visit to the US last year in October, the FM had said that India's one agenda during the G20 presidency in 2023 would be developing standard operating procedures (SOPs) for cryptocurrency. She had said that India would want to place the agenda on crypto before the G20 table for discussion and aim for a tech-driven regulatory framework.