Bitcoin Ban in India: No Ban on Cryptocurrency, Govt May Bring Crypto Tax, Say Sources

The central government may not go for a blanket ban on cryptocurrency, according to sources, Avaneesh Parasar

he central government may not go for a blanket ban on cryptocurrency in India, according to sources. To regulate cryptocurrency trading in the country, the central government is all set to bring a new bill during the upcoming winter session in the Parliament. The Centre had earlier formed the panel to study the issues related to digital currencies and propose specific actions regarding the crypto coins.

The much-awaited cryptocurrency bill is likely to prohibit all the private cryptocurrencies in India, with certain exceptions, according to the bulletin mentioned in the Lok Sabha website. The inter-ministerial panel has recommended that all private cryptocurrencies, except any virtual currencies issued by state, will be prohibited in India, according to reports.

However, industry experts believed that there will not be a ‘blanket ban’ on cryptocurrency in India. “The market cap of bitcoin is more than $1 trillion. Over the years it has transformed from being a speculative instrument to a store of value. All other cryptocurrencies are compared with bitcoin for reference. Government had earlier stated that they were looking to categorise crypto based on use cases. Going by that analogy, it is most likely that bitcoin will be considered an asset class,” said Edul Patel, CEO and co-founder of Mudrex, A global crypto investing platform.

Cryptocurrencies are not taxed in India currently, but taxpayers do need to declare their gains from investments in crypto. The rules and regulations around taxation on cryptocurrency are still at a nascent stage and will take some more time before it takes a firm shape. On taxation of cryptocurrencies in India, Kristin Boggiano, Member of Blockchain and Crypto Assets Council (BACC) said, “We believe that the gains derived from cryptocurrencies held for more than 36 months will be classified as long-term capital gains. However, the gains you make over a shorter period of time will be classified as short-term gains. The tax rate on these gains will vary depending on various factors like how much more popular Crypto investment is getting in India, its effect on Government’s net value, impact on the exchange rates of rupees vs. other international ones amongst several other such.”

The description of the draft bill was the same as was mentioned in a Lok Sabha Secretariat bulletin in January, before the budget session this year. A lot has changed since them, mentioned industry experts.

Recently, Prime Minister Narendra Modi held a meeting with officials on cryptocurrency scenario in India and the way forward. The central government sources had mentioned earlier it was looking at “forward looking and progressive” regulation on cryptocurrencies. After the meeting, Parliament’s standing committee on finance met to seek views from various stakeholders in the industry.

Earlier in May, finance minister had said that a very calibrated position will be taken on crypto and digital currency as the world is moving rapidly with technology. At an event last week, PM Modi said, “Take cryptocurrency or Bitcoin, for example. It is important that all democratic nations work together on this and ensure it does not end up in the wrong hands, which can spoil our youth.”

“While the description of the draft bill appears to be the same as in January 2021, several noteworthy events have occurred since January. First, the Parliamentary Standing Committee invited a public consultation, and then our Prime Minister himself came forward to call for crypto regulations in India. That being said, let’s respectfully wait to find out more about the draft bill to be tabled in the Parliament,” said Nischal Shetty, founder, WazirX.