Govt says no plans to tax crypto amid calls for regulatory clarity

The government of India again reiterated its stance around the regulation of cryptocurrencies in India, saying it has no plans to tax crypto transactions. In a latest written reply in the Lok Sabha, union minister of state (MoS) for the finance ministry, Pankaj Chaudhary said: "Crypto assets or virtual digital assets (VDAs) are unregulated in India and government does not collect data on these assets...currently, there is no proposal to bring legislation for regulating the sales and purchase of virtual digital assets in the country."

He was answering a query on whether the government had any proposal to bring legislation for regulating the sale and purchase of virtual digital assets in the country. The minister, however, said the Financial Intelligence Unit India (FIU-India) has been authorised to designate virtual digital asset "service providers" as reporting entities under the Prevention of Money Laundering Act, 2002.

During an another reply in the Lok Sabha on July 29, 2024, MoS Chaudhary had said that all jurisdictions, including India, were expected to evaluate the country-specific characteristics and risks and engage with standard-setting bodies and the G20 for any necessary measures on crypto assets. The IMF–FSB Synthesis Paper provided a policy and regulatory framework on crypto assets taking into account the full range of risks to emerging markets and developing economies, he said.

According to the minister, there was a consensus at the G20 last year during India's Presidency, whereby the roadmap contained in the Synthesis Paper was adopted as the 'G20 Roadmap on Crypto Assets". The roadmap encourages the IMF, leveraging its extensive membership and network across constituents, and the FSB, through its regional consultative groups (RCGs) in Asia, the Middle East, and North Africa, to take specific steps to build institutional capacity beyond G20 jurisdictions. “In this regard, the IMF and FSB have been holding various workshops and seminars involving non-20 countries,” the minister said.

Reacting to the development regarding Parliament's response to crypto regulation in India, Ashish Singhal, CEO and co-founder, CoinSwitch said last week that several G20 countries and EMDEs were taking the lead on cryptoasset regulations. “India, too, must offer regulatory clarity and take a consultative approach while framing policies/regulations on virtual and digital assets (VDA),” he wrote on X. 

Reacting to the latest reply by the MoS, R Venkatesh, SVP and Head of Public Policy, CoinSwitch, said: "The DEA secretary indicated just a few weeks ago that a discussion paper is likely to be released by September 2024. We remain optimistic and will look forward to this paper to better understand the potential next steps for the VDA sector in India."

Other stakeholders have also called for the government to rethink and formulate a regulatory regime around the crypto industry. Dilip Chenoy, chairman, Bharat Web3 Association (BWA) says the body welcomes the recent comments by the department of economic affairs secretary on the upcoming discussion paper on VDA policy. “We look forward to studying the paper and offering our inputs. We urge the government and regulators to take the lead in formulating a comprehensive regulatory regime for Web3/VDAs in India.” 

Shivam Thakral, CEO of BuyUcoin, says the lack of clear regulations for the nascent industry is "concerning", as it leaves the crypto assets sector unregulated in India. "Establishing clear policies is important for fostering innovation and generating employment. This absence of a framework is hindering entrepreneurial investment and compromising security." 

He said the effective regulation can create a "secure environment" for users, encouraging investment and driving job creation in the evolving Web3 economy. "As highlighted during India's G20 Presidency, a coordinated approach is needed to address risks while fostering innovation and employment generation in the digital economy."

This is not the first time the government has shown hesitation in regulating the crypto space in India. The finance minister recently said that crypto requires global consensus and that regulation by one specific country will not help. The RBI has also been warning retail investors regarding the "lack of accountability and stability" in the crypto ecosystem. RBI Governor Shaktikanta Das has repeatedly urged cryptocurrency investors to keep in mind that they are investing at their own risk. “They also need to keep in mind that the cryptocurrency has no underlying, not even a tulip,” he said in May.