India Moves Towards Crypto Regulation

India Moves Towards Crypto Regulation

Published: March 31st, 2021

 In what appears to be the Indian government’s attempt to regulate virtual currencies, the populous Asian country is now asking all companies to disclose every virtual currency dealing in their balance sheets. The authorities are hoping the new regulation will bring more transparency into the industry.

The Indian government has made the first concrete move to regulate cryptocurrencies. In what appears to be a migration from the rumored plans to impose a blanket ban on crypto, the government has directed every company in the country to disclose the cryptocurrency dealings in its balance sheet.

The directive was announced by the Indian Ministry of Corporate Affairs on Thursday, March 25. Market insiders believe that the move will change crypto dealings in the country and is likely to improve transparency amongst cryptocurrency dealers, investors, and the government.

This latest directive requires companies to report profit and loss on all transactions involving virtual currencies. Besides, the companies must also reveal the amount of crypto they hold. Companies must also reveal details of any deposits or advances made by any person who intends to trade or invest in virtual currencies.

As migration from an earlier tough stance against crypto, India has amended Schedule III of the country’s Companies Act, 2013. The new directive becomes effective beginning the next financial year. It is the clearest the Indian government has been about cryptocurrencies for more than four years.

Shivam Thakral, the co-founder and CEO of BuyUcoin, an Indian-based crypto wallet, and exchange, said that the move is a major step in regulating virtual currencies in India. The whole process will become more transparent with easy crypto investment reporting procedures, Shivam added. He sees the move as a boost to institutional adoption of virtual currencies and crypto assets, adding that it will fire the Indian crypto industry to the next level.

Over 7 Billion Investors with a $1 Billion Plus in Crypto

India is believed to have more than a billion investors who have collectively put more than $1 billion in investment. The current situation complicates the environment for a government whose intention has been to impose a blanket ban on crypto from the word go. The easier way out now is to work out more policies and modalities that give the Royal Bank of India (RBI) better control over the industry.

By backing from a proposed ban, India has ensured that it fully participates in the crypto space.

According to Kumar Guarav, the founder and CEO of Cashaa, a cryptocurrency exchange and online banking platform for individuals with virtual currency portfolios, the new rule ensures that Indian companies play alongside big dogs such as Tesla and PayPal. Besides, the country would have proper reporting protocols and the huge trading volumes can now be tracked, he said.

India’s move comes as the RBI governor rushed to assure the public that her institution and the government are reading from the same script. However, the actions and direction assumed by the agency and the government department in charge of it do not corroborate Governor Shaktikanta Das’s words.

While the finance minister reiterated that the government would neither impose a blanket ban on crypto nor shut off all options regarding virtual currencies, the central bank has instead voiced major concerns. Besides, the finance ministry wants to take a measure position regarding crypto.

While answering questions regarding virtual currencies, the digital rupee, and the proposed digital currency bill at The Times Network’s India Economic Conclave, Das admitted that his institution had major concerns about crypto.

He said his bank has communicated these fears to the highest authority and it is now up to the central government to mull over the concerns and come up with the way forward. Meanwhile, the government is now considering opening more avenues to crypto exploitation.

Finance Minister Nirmala Sitharaman said during CNBC-TV18’s IBLA townhall on Friday, March 26, that the government has completely shelved plans to ban crypto. Instead, a very elaborate discussion is happening between the government and the country’s central bank, the minister added.

Giving the RBI the Upper Hand

Minister Nirmala’s response, however, seemed to give the RBI the deciding vote. It is the RBI’s responsibility to decide what kind of cryptocurrency and official digital currency the government should plan for and how they should be regulated, she added. That notwithstanding, the government will make sure an adequate window exists for all manner of experiments that can shape the crypto world for the better, the minister added.

She assured interested parties that the government has moved from its earlier position and instead, is thinking of a more calibrated approach. The minister reiterated that the world is moving fast and technology is setting the trend for the said move. It is therefore foolhardy to say that India is not considering the benefits of blockchain technology, she added.

Her views were echoed by Anurag Thakur, India’s Minister of State for Finance. Thakur said India is open to exploring and evaluating new technologies such as cryptocurrencies especially their role in improving governance.

Blockchain is an emerging technology and cryptocurrencies are a form of virtual currency. India must evaluate, explore, and consistently encourage fresh ideas with an open mind, the minister said. He said that the final decision would come from the inter-ministerial committee (IMC) in the form of a legislative proposal.

Thakur said the cryptocurrency bill would be presented in parliament following due process.

Meanwhile, Coinbase, the leading cryptocurrency exchange in the U.S. by volume, is fishing for fresh talent in India. The exchange announced on Thursday, March 25, that it is setting up a base in India and would be hiring local talent.

Final Thoughts

India has moved to regulate cryptocurrency by asking all companies to disclose every virtual currency dealing in their balance sheets. The move is a stark contrast to the blanket ban the government was rumored to be contemplating just weeks ago. The finance minister said the government is open to exploring new ideas and would provide enough room for experimentation to see how the technology can improve service delivery and governance.

Show Results