The Evolution of India’s Crypto Policy: From Taxation to Global Collaboration

The Evolution of India’s Crypto Policy: From Taxation to Global Collaboration

India
is currently in the process of creating a regulatory framework for
cryptocurrencies. It is based on recommendations from two significant
international organizations, the International Monetary Fund (IMF) and the
Financial Stability Board (FSB).

This
regulatory framework aims to provide a legal structure for the use and trading
of cryptocurrencies in India. It is expected to take shape over the next 5-6
months.

India’s Optimistic Outlook towards
Cryptocurrency Regulation

The
IMF-FSB recommends emphasizing the need for regulating the cryptocurrency
market rather than imposing an outright ban. These recommendations serve as a set
of guidelines that G20 countries can use to create their independent yet
coordinated crypto regulations.

The
blockchain analytic firm, CREBACO, which has consulted with various G20
committees and nations, provided insights into India’s strategy. According to
CREBACO’s CEO, Siddharth Sogani, India is adopting a five-point regulatory
framework. It emphasizes global collaboration in certain areas, such as
cryptocurrency taxation.

Cryptocurrency
companies will be required to establish robust Know Your Customer (KYC)
procedures. It will also cover the Foreign Account Tax Compliance Act (FATCA)
and the existing anti-money laundering (AML) standards. This step aims to enhance
user identity verification and prevent illicit activities.

Global Trends: Shifting from
Bans to Regulations in the Crypto Space

India
is developing a comprehensive regulatory framework for cryptocurrencies based
on recommendations from the IMF and FSB.

Cryptocurrency
companies will be required to establish robust Know Your Customer (KYC)
procedures. It will additionally cover the Foreign Account Tax Compliance Act (FATCA)
and existing anti-money laundering (AML) standards. This step aims to enhance
user identity verification and prevent illicit activities.

The
proposed framework includes real-time proof-of-reserve audits for crypto
platforms, ensuring they maintain sufficient reserves. India aims to establish
consistent cryptocurrency taxation policies nationwide to provide clarity.
Cryptocurrency exchanges may be granted a status similar to authorized dealers,
bringing them within the regulatory purview of the Reserve Bank of India (RBI).
Key positions like Money Laundering Reporting Officers (MLROs) may further be
mandated to enhance AML and CTF compliance.

These
measures prioritize transparency, security, and compliance in India’s evolving
crypto landscape.

Prime Minister Narendra Modi’s
G20 Emphasis on Cryptocurrency Regulation

Experts
believe that the global understanding of cryptocurrencies has evolved. Many
countries are shifting towards regulatory approaches rather than outright bans.
Regulation not only brings legitimacy to the crypto market but reduces the
risks associated with scams and illicit activities.

India
has been advocating for a global approach to cryptocurrency regulations, with
Prime Minister Narendra Modi emphasizing this during the G20 summit. The
country’s Finance Ministry is now focusing on formulating regulations based on
the IMF-FSB recommendations in the coming months.

It’s
worth noting that banning cryptocurrencies outright is no longer a viable
option. It would be challenging for one country to ban them when others are
not. India has not yet established specific cryptocurrency regulations, but it
did impose a 30% tax on cryptocurrency gains in 2022.

The
prospect of a comprehensive cryptocurrency regulatory framework in India is
viewed positively by the crypto industry in the country. Many believe it
provides clarity and legitimacy to this burgeoning sector.

This article was written by Tareq Sikder at www.financemagnates.com.

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