The release of the government's crypto discussion paper is also awaited
The implications of VDAs on financial stability are being evaluated
While crypto trading is legal in India, no crypto is seen as legal tender
India has been working on a crypto-focussed discussion paper since July
Photo Credit: Unsplash
The government has no specific timeline in sight to introduce new regulations for virtual digital assets (VDAs) in India, according to Minister of State (MoS) Finance Pankaj Chaudhary. The progress in regulation of VDAs in India was provided when Chaudhary answered questions from two Members of Parliament in the Lok Sabha on Monday. He also stated that VDAs, such as cryptocurrencies, are borderless in terms of usage, adding that regulations would require international cooperation.
Chaudhary was responding to a question put forth by Members of Parliament Appalanaidu Kalisetti and Lavu Sri Krishna Devarayalu, who were seeking answers from the government about efforts taken to establish a comprehensive regulatory framework to oversee the VDA sector.
The MoS Finance said that the formulation of crypto rules requires thorough evaluation of taxonomy standards along with an assessment of the risks and benefits linked to VDAs.
“There is no specific timelime for the process, including the publication of the Discussion Paper, as it may only be published after such stance or stances are determined based on the evaluated risks. Further, the need to balance investor protection and innovation must be assessed in light of the broader objective of protecting the Indian economy from the risks posed by the VDA sector,” the MoS Finance told the Lok Sabha.
“All jurisdictions, including India, are expected to evaluate their country-specific characteristics and risks, and engage with standard-setting bodies and the G20 to appropriately consider any necessary measures for crypto assets. A part of such a process may involve the publication of a Discussion Paper to obtain feedback on the stance or various,” he added.
Economic Affairs Secretary Ajay Seth said in July that the government's discussion paper will include suggestions around the future of crypto regulation in India.
At the time, Seth had also said that regulators have invited ideas and feedback from the industry stakeholders on ways to ensure the sector's growth while maintaining the security of national financial standards. Details on the development of this discussion paper are yet to be announced.
As of now, crypto incomes are taxed by 30 percent in India. Each crypto transaction also sees a deduction of one percent tax at source — crypto firms have been requesting the government to reduce these taxes.
Last year, the government's Financial Intelligence Unit (FIU) mandated all firms dealing with VDAs to register with it to legitimise their operations in the country. In addition, all crypto firms have been directed to comply with India's anti-money laundering laws to prevent the misuse of cryptocurrencies to move illegal funds.
During its G20 Presidency in 2023, the government spearheaded the movement to bring all the G20 nations together to collaborate on VDA regulations that could be deployed uniformly across countries. Work on these regulations is still in progress.
The UAE and the European Union, have already deployed comprehensive rules to regulate the crypto sector. The UK, is expected torelease detailed guidelines for VDA firms to adhere to by 2026.
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