How India Govt. is Taking its First Move to Regulate Bitcoin
After months of uncertainties over legalizing or banning cryptocurrencies, the Indian government has finally taken an encouraging step towards regulating digital currencies. The Ministry of Corporate Affairs (MCA) has made it mandatory for companies to disclose crypto trading/investments during the financial year. This could possibly mark the first move by the government to regulate cryptocurrencies and related transactions in India as Experts see it as a positive step and expect the taxation rules to follow through.
Companies have now been asked to disclose in their annual financial statements the amount of crypto currency held as on reporting date. Also, companies have to now disclose in their financial statements the details of deposits or advances taken from any person for trading or investing in crypto/virtual currency, an MCA spokesperson has said in a statement.
The move comes even as the Centre and the Reserve Bank of India are in active consultation to firm up a framework for regulating cryptocurrencies and looking at even introducing their own digital currency while banning private crypto exchanges.
The Blockchain and Crypto Assets Council (BACC) of the Internet and Mobile Association of India (IAMAI) has welcomed the government’s move on making it mandatory for companies to disclose investments made in cryptocurrencies. Favoring the development, BACC of IAMAI stated it’s a move in the right direction that will bring greater transparency.
“The move opens the door for all Indian companies to have Crypto on their balance sheets. It is a good sign that India is moving towards more acceptance and awareness amongst the mainstream markets and regulators. This would help in shaping the crypto-assets market, eventually leading to its growth. It is in a positive direction and would bring transparency, legitimacy, and structure to the industry,” says Sohail Merchant, CEO, Pocketbits, a member of IAMAI’s Blockchain and Crypto Assets Council.
Sumit Gupta, CEO & Co-founder, CoinDCX, opined, “With companies across the world adding crypto assets to their books, this is a timely initiative by the MCA. This move will bring in a lot of transparency and will act as a comfort for Indian companies which are dealing in crypto-assets and were previously confused on how to put it in their books.”
Experts believe, the new move by the government will also usher in more transparency, thereby improving the overall corporate governance architecture of an organization, while enabling the governmental authorities to monitor cryptocurrency dealings being undertaken by corporations, at the same time.
“This is a definite endorsement, and it is good to see that India is not falling behind the global cryptocurrency race. Bringing regulation that provides safety to investors, factors taxation and fosters cryptocurrency as an alternate investment class will be the right step ahead,” Monark Modi, Founder and CEO, Bitex, a global cryptocurrency exchange said in a statement.
A government-appointed panel, headed by SC Garg, former Finance Secretary, had recommended banning of cryptocurrency while allowing a sovereign digital currency. The government’s concerns with crypto-currencies were two-fold. The first is that crypto-currencies are global and sovereigns have very little control on speculative activity in these assets. The second is that crypto-currencies can be used to finance frauds, ponzi schemes, terrorism financing and money laundering. However, crypto exchanges say that a ban on crypto-currencies would not address these concerns. In fact, a ban would just lead to more illicit or black market activity. Investors would be deprived of the very real benefits of cryptocurrency. The ban would prevent Indians from capitalizing on crypto-asset appreciation, which blockchain evangelist Balaji Srinivasan had earlier said that India will make a trillion-dollar mistake by banning cryptocurrencies.
On one hand, there is also considerable lack of clarity around regulatory, accounting, and taxation aspects while the element of risk remains high, on the other over 7 million investors are believed to have put more than $1 billion in cryptocurrencies in India. The real long-term solution, as Srinivasan suggested, is for the government to gradually reduce controls over capital mobility and make India a more desirable investment destination.
While the debate about banning crypto-currencies is still on, this can be regarded as the first move to regulate bitcoin and other cryptocurrency. Experts believe, with this move, the government has ensured, that in a global scenario wherein giants like Tesla, PayPal are actively participating in the crypto domain, the Indian companies are not falling back. In fact, regulators and authorities can track sources of funds used in trading or investing in cryptocurrency.