Who is saying what about bitcoin regulations
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Virtual currencies, especially bitcoin, have captured the attention of the decisionmakers in the country. Multiple regulators, the government and other stakeholders are now closely watching this space. However, as of now, there is still no clarity on the regulations that are there for cryptocurrencies. Here is a roundup on the stance that each body has taken so far in this regard.
The Reserve Bank of India
In 2013, for the first time, the central bank sent out a cautionary note to the users, holders and traders of virtual currencies (VCs)—including bitcoin—about the potential financial, operational, legal, customer protection and security-related risks that they are exposing themselves to. “The creation, trading or usage of VCs including bitcoins as a medium for payment are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities. As such, they may pose several risks to their users,” the apex bank stated in a notification.
After this, in February 2017 and again in December 2017, the RBI reiterated caution on the risks of virtual currencies including bitcoins.
Last week, finance minister Arun Jaitley said the government will not take any immediate action against cryptocurrencies. In response to a question in the Rajya Sabha, Jaitley said that the government was awaiting a report of the expert group that was constituted to look into virtual currencies. He said that since there are a large number of cryptocurrencies operating globally, the government didn’t want to take any knee-jerk action immediately and hence wait for the report. In April 2017, the government had set up a committee to find ways to deal with virtual currencies. The committee was asked to come up with the report in 3 months. However, there is no update so far. Meanwhile, in December 2017, the finance ministry termed bitcoin as a “Ponzi scheme” and said that bitcoin is not a currency.
Income tax department
In December 2017, the income-tax department surveyed all major bitcoin exchanges. According to the exchanges that were surveyed, the broad swathe of discussions was to understand cryptocurrencies and their users. The tax department asked for data to analyse taxability of bitcoins. After the survey, about 500,000 high net worth individuals received income tax notices to disclose their bitcoin and other virtual currency holdings and trades. According to tax experts, gains from bitcoin attract tax. If you have held bitcoins for no more than 36 months, gains from it will be taxable at your applicable slab rates and if you make gains after holding bitcoins for more than 36 months, then long-term capital gain will be applicable—you will be taxed at 20% (plus surcharge and cess as applicable), with the benefit of indexation.
Market regulator and Enforcement Department
After the government said that bitcoins are like Ponzi schemes and are not currencies, the enforcement agencies said they could act against bitcoin platforms and exchanges for illegal money pooling. The Securities and Exchange Board of India (Sebi) will take action against these exchanges if they are serving as collective investment schemes. In December 2017, Sebi chairman Ajay Tyagi said bitcoin had so far not posed any systemic risk, but added that it can no longer be ignored. This is not the first time the enforcement department would be looking into bitcoin. In 2013, it had raided some of the bitcoin exchanges in the country.
For now, there is no clarity on the fate of bitcoin. However, the government’s current decision to wait for the final report from the committee of experts indicates that cryptocurrencies are here to stay for sometime at least.