India may classify Bitcoin as an asset class, but that may not solve the underlying problem
- The Indian government is reportedly mulling over classifying Bitcoin as an asset class of its own.
- This will make it easier for Indians to trade in it by giving the Securities and Exchange Board of India (SEBI) control without banning Bitcoin altogether.
- Regulation around cryptocurrencies is expected to be tabled in Parliament during the Monsoon session next month.
Sources told the New Indian Express that the Finance Ministry would be formulating a new set of regulations for Bitcoin and the Securities and Exchange Board of India (SEBI) would be in charge of how these regulations are implemented.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was supposed to come to the fore during the Parliament’s Budget session in March. However, the session was cut short due to the second wave of COVID-19 infections in India.
AdvertisementNow, it is expected that the bill will be tabled during the Monsoon session of Parliament set to kick off next month.
But, not everyone is in support of the new regulations in their current form. The bill met widespread pushback from both crypto companies and industry experts.
Why does it matter if Bitcoin is classified as an asset class?
According to a brief posted on the agenda for the Parliament session, the cryptocurrency bill wants to “create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India (RBI)”.
It is also looking to “prohibit all private cryptocurrencies” in India, which has led to speculations about what India would classify as a ‘private cryptocurrency’.
It’s possible that Bitcoin’s classification as an asset class will take it out of the purview of private cryptocurrencies and make it akin to gold and other taxable assets. The Internet and Mobile Association of India (IAMAI) had clarified in February that the existence of a CBDC wasn’t pre-conditioned on banning crypto assets in India.
Advertisement“Existence and use of crypto assets by Indian consumers open up a wide scope for Indian entrepreneurs to issue such currencies and it is likely that Indians who comprise 15% of global buyers will prefer an Indian crypto asset,” the industry body stated.
The IAMAI has also formed a set of self regulatory guidelines for crypto companies who are among its list of members as the government mulls over its new legislation.
Will Bitcoin being an asset class be enough?
AdvertisementCrypto being classified as an asset class may not end the industry’s woes with regulations though. India’s Enforcement Directorate ( ED), an agency tasked with fighting economic crime, issued a notice to the country’s largest crypto exchange
ED has issued Show Cause Notice to WazirX Crypto-currency Exchange for contravention of FEMA, 1999 for transaction… https://t.co/dcU8XlOugB— ED (@dir_ed) 1623397497000
While WazirX has said that it complies with all required laws, including collecting know your customer (KYC) documents and anti money laundering (AML) processes, the ED is the second regulatory body to take steps against crypto exchanges.
AdvertisementThe Reserve Bank of India (RBI) had also issued an informal guidance to lenders to stop doing business with crypto companies last month.
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