All you Need to Know about Indian Government Policy on Cryptocurrency

Indian Government Policy on Cryptocurrency: Cryptocurrencies were designed to be decentralized, meaning a central authority does not control them. The independent nature of cryptocurrencies provided an alternative to traditional financial institutions, typically centralized and controlled by banks and NBFCs. There have been reports and statements that the Indian government has been working on a crypto policy since 2019. However, nothing has been finalized yet. The most recent statement from the Indian Finance Minister Nirmala Sitharaman said that the government plans to discuss crypto regulations with the G20 members, to see how best it can be done.

The Cryptocurrency Bill was scheduled in the year 2021, in the Winter Session of the Parliament but it didn't happen. However, in the current Lok Sabha session, the Ministry of Finance was questioned about the Bill.

The question was raised as to: What is the current status of the Cryptocurrency Bill? When will it be tabled and be open for inputs?  Which ministry/department will regulate the virtual assets like cryptocurrencies, non-fungible tokens (NFTs), decentralized applications, real estate tokens, and other assets?

Cryptocurrency Awareness Campaign

The Indian government is reportedly launching a first-of-its-kind cryptocurrency awareness campaign. It will be conducted by the Investor Protection and Education Fund Authority, a government body controlled by the Ministry of Corporate Affairs.

A government official was quoted by ET as saying:

The campaign will highlight that cryptocurrencies are not legal in India and there are also deep risks involved in such assets. Any investment where the people are being promised lucrative and assured returns, there is an element of high risk.

Both the crypto and gaming sectors have long faced scrutiny from Indian lawmakers. For instance, in July 2022, Finance Minister Nirmala Sitharaman conveyed the Reserve Bank of India's (RBI) concerns regarding cryptocurrencies, saying that they should be prohibited as they have the potential to destabilize the country's monetary and fiscal stability. More recently, the RBI clamped down on crypto exchanges across the country for their alleged involvement in money laundering of more than Rs. 1,000 crores.

And finally, back in February 2022, the government imposed a hefty 30 percent tax on crypto profits and 1 percent TDS on all crypto transactions.

The Cryptocurrency Bill 2021 is a legislative initiative that was introduced in the Lok Sabha by the government to regulate the thriving market of cryptocurrency in India. The industry has seen a rush in investment in the last few years, especially during the covid period not just domestically but also internationally.

Crypto trading platforms like WazirX, CoinDCX, Zebpay, etc. in India are witnessing a big leap in volumes. An unregulated crypto market is unfavorable and risky even when the government wants to protect young entrepreneurs and investors. By introducing the Cryptocurrency Bill in 2021, the government officially took a step toward regulating cryptocurrency.

Features of Cryptocurrency

• Decentralised: Cryptocurrencies typically use decentralized control as opposed to a central bank digital currency. When a cryptocurrency is minted or created prior to issuance or issued by a single issuer, it is considered centralized. When created with decentralized control, each cryptocurrency works through what is called distributed ledger technology, which is typically a blockchain, that serves as a public financial transaction database.
• Cheaper to transfer: Some coins are used to transfer value (measured in a currency like dollars) cheaper and faster than using credit or conventional means. Meaning the cost to send someone crypto, which can be converted into regular currency, is cheaper than something like a check or wire transfer.
• Illegal and highly volatile: However crypto is NOT just used for illegal purposes. In fact, due chiefly to its price fluctuation and other reasons it has fallen out of favor on the black market.
• No physical form: Cryptocurrency does not exist in physical form (like paper money) and is typically not issued by a central authority. However, it can be and many governments are working to create a crypto coin version of its respective fiat currency.