Budget Session 2022 might clear out many grey areas of crypto regulations.
During every Parliamentary Session, it is expected that crypto regulatory uncertainty will be brought to an end or at least reduced.
A lot of frenzy was witnessed during the Winter Session 2021 when the crypto bill was listed to be tabled in the Session.
This time the same level of speculation about crypto regulations is there for the Budget Session 2022 of the Parliament.
Crypto has come a long way from just a fad among computer geeks. Millions of Indians have invested in it.
So, regulatory clarity is the need of the hour for both investors and entrepreneurs.
Several issues are needed to be addressed.
It is expected that the Budget Session 2022 will clear out the smoke on the following issues of crypto regulations.
Government is expected to provide regulatory clarity on this issue. As of now, the crypto companies of India are resorting to their self-regulatory practices to avoid any conflict.
Recourse from Law
Many malicious actors are taking advantage of the regulatory uncertainty to con people of money. Some of these offerings are Ponzi schemes.
If someone falls prey to such conmen, there is no specific authority from which recourse can be sought. Victims usually lodge an FIR with Police, but the process is slow because Police too is not that well acquainted with crypto. A dedicated authority or department for crypto-related crimes can fast track the process.
Since crypto-assets are transnational in nature, their regulation is possible only through international cooperation. Prime Minister Narendra Modi had called for global cooperation among democracies to regulate crypto, in November 2021 during the Sydney Dialogue.
The following month he opined that crypto should be used to empower democracy not undermine it, at the Summit for Democracy.
Announcement on similar lines can be made in the Session.
Indian Entrepreneurs Registering Business Abroad
India has always had an edge in Information Communication Technology (ICT). The same talent is now being used in the crypto industry. However, the talent is moving out as majority of the Web3 or associated companies have their primary headquarters outside India.
They only keep a subsidiary in India due to regulatory uncertainty. The year 2021 was the year of unicorns for India so much so that crypto exchanges CoinDCX and CoinSwitch, founded by Indians and with their primary market in India, turned unicorns.
Moreover, Polygon Network, a popular blockchain project, was also founded by Indians. The money is flowing out of the country because these entrepreneurs are not able to find suitable conditions back home.
Foreign Exchange Management Act (FEMA)
As discussed above, crypto assets are transnational and can easily flow from one country to another. The movement of currency outside India’s borders invokes Foreign Exchange Management Act (FEMA) provisions. FEMA laws should provide the appropriate guidelines for crypto assets as crypto is not treated as a sovereign currency. This has caused issues for crypto exchanges.
Sumit Gupta, Co-Chair of Blockchain and Crypto Assets Council (BACC) and Co-founder and CEO, CoinDCX, told Financial Express,
“In case transactions involve a party from beyond the Indian geography appropriate reporting to RBI under FEMA can be done similar to investment under LRS as well.”Sumit Gupta, Co-Chair of Blockchain and Crypto Assets Council (BACC) and Co-founder and CEO, CoinDCX
Most of the reports in mainstream media are suggesting that crypto regulations are still a distant dream. Much of the Budget Session 2022 could be focussed on providing a structure on the taxation of crypto assets.
A report, from Economic Times, talks about that the Finance Minister, Ms. Nirmala Sitharaman is expected to speak about taxation on crypto assets. It is being expected that a specialized tax regime may be formulated for crypto.
With every passing Parliamentary Session, the country grows eager to get regulations. But it is hurting the prospects of entrepreneurship in India. Government has set the target of making India a $5 trillion economy. Favourable laws for entrepreneurship are imperative for that.
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