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India’s relationship with cryptocurrencies has continued to be murky at best. The situation is made markedly worse by regulators, who have made a habit of being coy on the subject. However, one former policymaker has called on the Reserve Bank of India to adopt crypto and go deeper into the digital currency age.
Building the Right Environment for Assets to Thrive
Earlier this week, Rama Subramaniam Gandhi, a former governor at the Reserve Bank, spoke at the inaugural Hodl 2021 virtual conference. Gandhi had tried to push the agency into adopting cryptocurrencies and creating an enabling environment for the assets to thrive in India to no avail. The inaugural Hodl event, which was organized by the Blockchain and Crypto Assets Council of the Internet and Mobile Association of India, included several notable people across India’s crypto industry. They had reps from companies like top exchanges WazirX and CoinDCX, trading service ZebPay, and blockchain developer Polygon. While many of them gave opinions about the potential for blockchain and crypto to improve lives across India, Gandhi’s speech focused more on the regulatory angle. Gandhi had led the Reserve Bank from 2014 to 2017. As the former policymaker pointed out, cryptocurrencies should be treated in the country as a commodity or an asset - and appropriately taxed. He added that a stable regulatory framework would make it easier for Indians to invest in and hold cryptocurrencies.
“Cryptocurrencies should be paid for through normal payment channels. If they are not, it should be deemed mined, and capital gains tax must be levied. That is like voluntary disclosure.”
Murky Crypto Stance Won’t Affect CBDC Development
India’s stance on crypto has continued to be highly controversial. The Reserve Bank banned commercial banks from transacting with crypto companies in 2018, but the decision was overturned last year following a landmark ruling from the Supreme Court. But, regulators still weren’t done. Legislation tagged the “ Cryptocurrency and Regulation of Official Digital Currency Bill 2021” was introduced earlier this year to ban crypto, although it hasn’t been signed into law. The Economic Times reported in May that the government might consider overturning the ban to regulate digital asset trading instead. But, not much action has been made in either direction. Despite the murky stance on crypto, India’s government remains resolute in its mission to build a central bank digital currency (CBDC). Speaking to CNBC recently, Reserve Bank governor Shaktikanta Das explained that CBDC trials could commence before the end of the year. Das pointed out that the Reserve Bank is very careful in handling a possible digital rupee, even as several other countries worldwide progress with currency digitisation. He explained that the regulatory watchdog is more concerned with examining the CBDC’s impact on the financial sector, especially with affected monetary policy. On the technical front, the Reserve Bank is also looking into the merits of using blockchain for the proposed CBDC. With all of this, Das expressed confidence in the Reserve Bak’s ability to get a framework ready to start tests by December.