A multi-ministerial group, which now includes the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), has been tasked with formulating a comprehensive cryptocurrency policy for India. Despite the lack of tax relief in the 2024-2025 budget for crypto users, there is anticipation for a “discussion paper” on the government’s stance towards the crypto industry, expected to be released before September this year.
Purpose of the Discussion Paper
The primary goal of this discussion paper is to gather feedback from relevant stakeholders on the proposals it contains. This initiative is crucial in developing a regulatory framework for cryptocurrencies, which are currently governed only by anti-money laundering (AML) and electronic funds transfer (EFT) laws.
Focus Areas
India’s Economic Affairs Secretary, Ajay Seth, mentioned in an interview with Moneycontrol that the discussion paper would provide recommendations on regulating cryptocurrencies. Additionally, it will explore whether the regulatory scope should be broadened and what the overall policy direction should be. The paper aims to facilitate comprehensive stakeholder consultation and is expected to be ready by September.
Seth stated,
“The policy stance is how does one consult relevant stakeholders, so it is to come out in the open and say here is a discussion paper these are the issues, and then stakeholders will give their views.”
Global Guidelines Influence
India’s decision to release a discussion paper follows the support from G20 countries for the International Monetary Fund (IMF) and Financial Stability Board (FSB) guidelines during India’s G20 presidency last year. These guidelines suggest avoiding aggressive measures like outright bans on crypto activities due to enforcement challenges.
Industry Responses
Sumit Gupta, co-founder of CoinDCX, expressed optimism about the government’s step to form an Inter-Ministerial Group for the review and release of a consultation paper. Speaking to CryptoPotato, he stated,
“This initiative is a significant step toward shaping the future of the rapidly evolving and dynamic Web3 industry in India. As key stakeholders in this sector, we urge the government to actively seek input from domestic businesses. Engaging with local businesses will ensure that the regulatory framework is robust, inclusive, and supportive of innovation.”
Taxation Issues Persist
Despite progress in policy discussions, the Indian crypto industry still faces a challenging tax environment. Crypto entities in India must register with the Financial Intelligence Unit (FIU-IND) to meet AML and counter-terrorism financing standards set by international bodies like the Financial Action Task Force (FATF). This requirement has boosted the industry’s credibility. However, the current tax system, which includes a 30% tax on cryptocurrency gains and a 1% Tax Deducted at Source (TDS) on crypto asset transfers, continues to raise concerns among investors and industry professionals about its impact on the market.
Adding to these challenges, Finance Minister Nirmala Sitharaman did not announce any changes to the existing crypto tax regulations in the 2024-2025 budget, disappointing many in the sector.
As the discussion paper’s release nears, the Indian crypto community remains hopeful that a more favorable regulatory framework will emerge, encouraging innovation and growth in this rapidly evolving industry.
