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Government may form a new panel for crypto-regulations: Report

The government could set up a new panel to recommend the ideal course of action for regulating crypto-currencies, the Economic Times reported. This development comes at a time when banks and payment companies are blocking their services to crypto-exchanges, as a result of which the exchanges are unable to accept fresh deposits and on-board new investors.

Back in 2019, a Finance Ministry committee headed by the former finance secretary Subash Chandra Garg had recommended a complete ban on crypto-currencies and suggested that the government enact criminal provisions against crypto-firms, investors, miners and other market participants. Garg left the government in July 2019, a year before he was due to retire.

However, since then Garg seems to have changed his views and recently recommended that the government regulate the crypto-currency market. “I don’t think we still have full clarity and understanding about how to regulate cryptocurrencies … Regulate, control crypto-currencies but allow the crypto assets, encourage the crypto services,” Garg said during an event organised by the IT industry body Assocham on May 10.

According to the ET report, the committee could be tasked with exploring the use-cases for blockchain and recommend regulations for crypto-currencies, treating them as digital assets instead of as a currency. The committee may also be asked to study ways in which the Reserve Bank of India’s (RBI) digital rupee can be operationalised, the report said citing three unnamed sources. One source said that there is a view within the government that the Garg committee report is dated and therefore, a fresh look at the issue is warranted.

Further, the unnamed sources said that the Finance Ministry is consulting with industry stakeholders and regulators on the potential supervisory risks, and that the Finance Minister Nirmala Sitharaman will be briefed towards the end of the month on various developments in the crypto-currency industry.

In January this year, the government announced plans to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which will ban “private” crypto-currencies while at the same time providing the RBI with the requisite legal powers to develop a central bank-backed digital currency (CBDC). There have been numerous developments in the crypto-industry in India since then.

Timeline

  • January 30: Government proposes bill to develop a digital Rupee while banning crypto-currencies [Read]
  • February 9: Government says new law to ban crypto-currencies being finalised [Read]
  • February 12: Industry experts say a CBDC or stablecoin model will give regulators adequate powers of oversight and monitoring [Read]
  • February 16: IAMAI questions governments’ pre-emptive ban on ‘private’ cryptos [Read]
  • February 19: Government says that it will levy Income Tax and Goods and Services Tax (GST) on commissions and trading gains made from trading crypto-currencies [Read]
  • February 22: Securities and Exchange Board of India tells promoters to square their crypto-currency investments before they launch an initial public offer or other capital raising instruments [Read]
  • February 24: IAMAI finalises Code of Conduct for crypto-currency firms in India [Read]
  • March 8: Finance Minister says the government will adopt a ‘calibrated approach’ to crypto-currency regulations [Read]
  • March 11: IAMAI publishers white-paper highlighting the negative effects of a crypto ban [Read]
  • March 15: Finance Minister says that the proposed crypto-bill will allow experiments’ in crypto-currencies [Read]
  • March 22: Government says it is considering  block IP addresses of prominent crypto-currency exchanges after a three to six month moratorium window for investors [Read]
  • March 23: Nandan Nilekani says that government should treat crypto-currencies as an asset class [Read]
  • March 23: Government tells Parliament that the Income Tax authority will tax capital gains on crypto-investments, while the and GST authority will tax fees earned by exchanges [Read]
  • March 25: Government amends company financial disclosure rules mandating companies to disclose crypto-holdings, investments and funds received from end investors [Read]
  • April 12: Bengaluru-based technology think-tank iSpirt says that by leveraging India Stack, Indian small-medium businesses can tap large amounts of crypto-capital [Read]
  • May 4: Leading private sector banks begin shutting accounts and payments channels for crypto-exchanges [Read]
  • May 7: IT  industry body IndiaTech.org recommends that the government enact traceability provisions as part of crypto-currency regulations [Read]
  • May 16-18: Crypto-exchanges face bank and payment issues, leading to them stopping fresh investor deposits [Read]

MediaNama has prepared a guide on crypto-currency regulations in India, listing the government’s position over the last few years and various policy recommendations; read it here: A complete low-down on crypto-currency regulation in India

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