India has shown serious intent to develop a regulatory framework for virtual digital assets (VDAs); otherwise, cryptocurrency. The move comes in the backdrop of the surging popularity of crypto assets and their potential impact on the financial system. The government is aiming to strike a balance between innovation, protecting investors, and safeguarding the nation’s economic stability.
Recognizing the global appeal of VDAs, India is advocating for international collaboration to establish effective regulations and prevent regulatory arbitrage. This effort is being shaped by both domestic considerations and global regulatory trends.
BREAKING: 🇮🇳 Crypto regulation discussed in parliament: 🧵
1⃣ Comprehensive Framework: The government is working on a regulatory framework for VDAs but emphasizes the need for international collaboration to address their borderless nature and avoid regulatory arbitrage. pic.twitter.com/Njlvw48Urj
— Crypto India (@CryptooIndia) December 16, 2024
Current Regulations and Frameworks in India
As of March 7, 2023, India has placed VDAs under the Prevention of Money Laundering Act (PMLA), to address money laundering risks. Additionally, income generated from VDAs is subject to taxation under the Income Tax Act of 1961.
The government also leverages the Information Technology Act, 2000, and the Companies Act, 2013, to oversee other aspects of crypto operations. These measures aim to bring transparency and accountability to the crypto market while addressing emerging challenges.
2⃣ Current Regulations:
⦿ VDAs are under the Prevention of Money Laundering Act (PMLA) since March 7, 2023.
⦿ Income from VDAs is taxed under the Income Tax Act, 1961.
⦿ Other aspects are regulated under the Information Technology Act, 2000, and the Companies Act, 2013.— Crypto India (@CryptooIndia) December 16, 2024
Global Collaboration and India’s Role
India’s leadership at the G20 Summit of 2023 provided a platform to push for a global regulatory consensus on crypto assets. The IMF-FSB Synthesis Paper and the G20 Roadmap on Crypto Assets were adopted under India’s guidance.
These initiatives aim to establish a coordinated global framework for crypto regulation, emphasizing financial stability and investor protection across borders. India’s active participation in these international efforts underscores its commitment to tackling the complexities of crypto regulation on a global scale.
Stakeholder Consultations and Upcoming Developments
The Indian government has been actively engaging with stakeholders, including industry leaders and international organizations, through both formal and informal consultations. These consultations aim to gather insights and build consensus on the most effective approach to regulating VDAs.
A discussion paper outlining the government’s regulatory stance is expected to be released soon. However, a specific release date has not been announced. The government is taking a cautious approach, prioritizing both innovation and investor protection while maintaining financial stability.
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