Cryptocurrencies has made millionaires, even billionaires of the people who invested in in its early years, but the economy regulatory bodies of India are still weary.
Finance minster Arun Jaitley, in his budget speech today (Feb. 01), stated that the government will do everything to discontinue the use of bitcoin and other virtual currencies in India. He reiterated that India does not recognise them as legal tender and will instead encourage blockchain technology in payment systems.
“The government does not recognise cryptocurrency as legal tender or coin and will take all measures to eliminate the use of these cryptoassets in financing illegitimate activities or as part of the payments system,” Jaitley said.
Other countries, too, have been jittery in this regard. For instance, in January China was reportedly preparing to widen its crackdown on cryptocurrency trading. Nonetheless, Indian cryptocurrency exchanges held out hope, arguing that the government would maintain some balance in its regulations.
Here are five things the Budget might provide clarity on pressing issues:
Clarity on tax: whether a tax on transaction (similar to Securities Transaction Tax) or on returns from trading would be taxed and if so, at what rates, would help bring clarity on perhaps the hundreds of crores in Bitcoin, ethereum and other cryptocurrency held by Indian citizens and prevent the transfer of these to obscure wallets beyond Indian shores
Clarity on KYC: While Zebpay, Koinex already ask for documents like PAN and Aadhar, proper KYC steps can help alleviate government concerns around money laundering and also make it easier for these platforms to set and enforce standards
Clearer directions for banks: Government directives to banks about reporting money transferred to cryptocurrency platforms, instead of totally blocking such transfers, may unearth unaccounted income and also help ease issues of legitimate investors whose investments through these crypto platforms are today in a limbo due to lack of withdrawal facilities
Directives on ICOs: Initial Coin Offerings are a rage and Indian start-ups may at some time also look to jump in and issue their own ICOs; clear regulations around this can help protect investors while also enabling legitimate start-ups to get access to funding
Exploring smart contracts in government processes: Dubai, Estonia and other countries are starting to explore using ‘smart contracts’ which are based on blockchain technologies for keeping land records, etc.; land records has been an intractable problem for a large country like India and declaration of pilot around using ‘smart contracts’ can help start more innovations around blockchain technology and also may also reduce corruption