Is India Reviewing Its Crypto Stance?
According to a Reuters exclusive report, India is looking beyond its own strict ideology.
In an interview with Reuters, Economic Affairs Secretary Ajay Seth cited shifts in crypto regulations across multiple jurisdictions as a reason for the change in India's approach to crypto regulations.
The status of cryptocurrency in India remains complex. In 2018, the Reserve Bank of India (RBI) banned crypto transactions through banks. However, in March 2020, the Supreme Court reversed this restriction, enabling banks to cater to crypto exchanges.
Still, unlike many major countries, crypto tokens like Bitcoin and Ethereum are not recognised as legal tender in India. The country also does not have a standardised licensing process for crypto operators. The RBI, under previous governors and the government, has repeatedly cited macroeconomic, financial stability, and fraud risks for its stance.
So, is the Indian government's approach and stance changing due to the widening acceptance of cryptos like Bitcoin globally?
Pro-crypto US President Donald Trump issued an executive order for a working group to explore digital asset regulations and a national cryptocurrency stockpile.
In India, crypto investments have surged despite a strict regulatory approach.
In 2021, India introduced a bill titled "Cryptocurrency and Regulation of Official Digital Currency Bill." The proposal in its original form would limit private companies' ability while allowing the RBI to issue its own digital currency.
However, the bill has not yet passed. A discussion paper on cryptocurrency was scheduled to be released in September 2024.
As per Reuters, that paper could face further delays as the government adapts to these global shifts in attitude towards virtual assets.
In an interview with Reuters, Economic Affairs Secretary Ajay Seth said, "More than one or two jurisdictions have changed their stance towards cryptocurrency in terms of the usage, their acceptance, where do they see the importance of crypto assets. In that stride, we are having a look at the discussion paper once again."
The government is also poised to monitor crypto transactions more closely by introducing new amendments to the Income Tax Act.
The new tax law in 2025 would penalise undeclared cryptocurrency gains for up to 48 months with fines of up to 70%.
The changes state that virtual digital assets will be subject to back taxes and punitive tax audits in the same way that traditional assets like cash, jewellery, and gold bars are subject to penalties for late declarations.
The report said government data indicate that various crypto exchanges in India have outstanding goods and services tax (GST) balances totalling 824 crore rupees or about $97 million.
Binance, the world's largest crypto exchange, was fined 188.2 million rupees in June 2024 for breaching India's compliance regulations.
Separately, the budget proposed a designated reporting entity to disclose details of crypto transactions. However, the budget did not change the crypto taxation policy.
The 30% tax on crypto gains and the 1% tax deducted at source, or TDS, on transactions introduced in 2022 remain in effect.
More importantly, no deductions are allowed. Taxpayers can't claim deductions for expenses or losses incurred while trading cryptos.
Under previous governors, the RBI has opposed cryptos, citing risks to financial market stability. With a new governor, there is no clarity yet on the RBI's position.
Still, the current crypto bill proposals do not favour digital assets.
The bill's delay suggests India is considering an overhaul or seeking more clarity on the policy's needs.
Elsewhere
Events
X Space: Macro-Driven Cycle: BTC, Trade Wars & Political Wildcards (5 February)
BRN analyst Valentin Fournier joins ByBit and SignalPlus's X Space to discuss the state of crypto on Wednesday, February 5 at 1pm UTC (9pm SGT)
Join @thebrn_co analyst Valentin Fournier, along with AltCryptoGems, Brinc, and Signal Plus, on @SignalPlus_Web3 and @Bybit_Official's X Spaces to discuss Macro-Driven Cycle: BTC, Trade Wars & Political Wildcards on Wednesday, February 5 at 1pm UTC (pm SGT). https://t.co/Kcwxfp6VOe
— Blockhead (@blockhead_co) February 5, 2025
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Consensus Hong Kong convenes global leaders in tech and finance to debate pressing issues, announce key developments and deals, and share their visions for the future.
Use promo code BLOCKDESK20 at checkout for a 20% discount on tickets here.
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