Crypto Assets’ regulations may not adopt them as legal tender but may categorize them as ‘Asset Class’.
On Monday, the Parliamentary Standing Committee on Finance met the crypto companies and associations of India to discuss the opportunities and challenges in the industry.
As mentioned during the high-level meet on Saturday, India will make progressive and forward-looking regulations for the crypto industry.
During Monday’s meet, it was discussed that crypto cannot be stopped, but it must be regulated.
So, How Would the Regulations Look Like?
At the top of the list will be investor protection. As seen in other capital markets like stocks and commodities, a special focus will be on retail investor protection.
Also, the Government will be particularly bothered about the inflows and outflows of Digital Assets to and from the country and outside the national boundaries.
So, International Agreements may be signed, in order to keep a check on Money Laundering, Tax Evasion, and Terror Financing. For example, India is a signatory to the Financial Action Task Force and complies with its Travel Rule. More such agreements could be signed in future.
Tracking the assets on a blockchain is easy, but getting the data of transactions from the internal databases of Centralized Exchanges (CEX) is difficult. The rules may mandate CEXes to disclose the details of users and their transactions. Compliance with Anti-Money Laundering, Know Your Customer, and Know Your Business norms goes without saying.
Furthermore, since commercial transactions will be occurring on daily basis, an appropriate taxation system will also be needed for Digital Assets.
But, who is going to be the ultimate regulator enforcing all the rules? This remains the biggest question among all stakeholders. Will the Government assign the responsibilities to an existing institution or a whole new body will be established? Only time will tell.
Crypto may not become a legal tender, considering RBI’s aversion towards it. So, the question is how will crypto be classified. Most of the reports previously suggest categorizing it as an ‘Asset Class’.
Different countries are taking up different approaches. El Salvador has adopted Bitcoin as legal tender; Cuba has allowed Digital Assets to be used for commercial transactions.
India, being such a vast and diverse country and economy, cannot be compared to them. The country, as reports suggest, may categorize crypto as an ‘Asset Class’.
The soaring adoption of Digital Assets has caught the Government’s eye. India with its abundant pool of both technical and non-technical talent can capitalize on this opportunity and become a crypto hub.
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