The Indian government is expected to unveil a consultation paper on cryptocurrency regulations between September and October 2024, according to sources cited by CNBC-TV18. The paper, led by a panel headed by the Secretary of the Department of Economic Affairs (DEA), will seek input from stakeholders to guide the development of an effective regulatory framework for digital assets.
This forthcoming consultation paper underscores India’s commitment to addressing the challenges posed by cryptocurrencies, both domestically and globally. The initiative follows Finance Minister Nirmala Sitharaman’s statement in October 2023 that G20 nations have reached a consensus on a unified regulatory approach to cryptocurrencies.
Sitharaman emphasized the need for individual countries to tailor their legislative frameworks within this global consensus, stating, “Given the understanding that globally now all of us are on the same page about how regulations can happen, countries and their specific legislative arrangements will also have to be worked out.”
Although India currently lacks a specific regulatory framework for cryptocurrencies, the government introduced a tax regime in 2022 that imposes a 30% flat tax on crypto profits and a 1% tax deducted at source (TDS) on transactions. These measures have been criticized by industry leaders, who argue that they hinder the growth of the Web3 sector. Despite these concerns, the Indian finance minister’s 2024-25 Union Budget has maintained the existing tax regulations.
The Reserve Bank of India (RBI) has also expressed caution regarding the cryptocurrency market. In its May 2024 bulletin, the central bank warned that the “crypto ecosystem lacks accountability and stability and is marked by regulatory ambiguity.” The RBI further cautioned that some cryptocurrency systems may be “prone to crisis without safeguards.”
However, the legal landscape for cryptocurrencies in India remains fluid. Earlier this month, the Orissa High Court reaffirmed that cryptocurrency trading and transactions are neither banned nor deemed illegal in the country. In a related development, Binance, the world’s largest cryptocurrency exchange, announced its re-entry into the Indian market after complying with local regulations.
As India moves closer to establishing a comprehensive regulatory framework for cryptocurrencies, the upcoming consultation paper is expected to play a crucial role in shaping the country’s approach to digital assets.
