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India is not looking to regulate the cryptocurrency sector anytime soon according to Minister of State for Finance Pankaj Chaudhary.
Chaudhary’s comments came in response to questions directed to him by GM Harish Balayogi, a member of parliament. Balayogi’s questions sought clarity over the government’s stance regarding cryptocurrencies.
Specifically, the MP inquired about the extent of research or initiatives undertaken by the government to understand the crypto sector and wether or not there are any forthcoming legislations planned in this regard.
In his written reply on Aug. 5, Chaudhary said there is “no proposal” to regulate the “sales and purchase” of cryptocurrencies, which the Indian constitution refers to as virtual digital assets.
Regarding the establishment of an oversight mechanism to monitor the sector, Chaudhary said the Financial Intelligence Unit is “authorized” to designate Virtual Digital Asset Service Providers as reporting entities.
These entities, according to the FIU, are businesses that are obliged to adhere to the stipulations of the Prevention of Money Laundering Act (PMLA) of 2002. The move allows the regulator to keep a check on illicit activities such as money laundering and terrorism financing.
Further, the minister added that despite the lack of a solid regulatory framework, law enforcement agencies, which comprise regulators like the Reserve Bank of India, are equipped to investigate and act against illegal activities under existing laws.
One such agency, the Directorate General of GST Intelligence, recently sent a show-cause letter to Binance, ordering the exchange to pay $86 million in due taxes.
Regarding the inquiry about the government’s research work, Chaudhary said government doesn’t collect any data on cryptocurrencies as its an “unregulated” sector.
The minister of state also pointed towards the G20 Roadmap on Crypto Assets adopted by the G20 member nations under India’s presidency last year. The roadmap stemmed from a joint IMF-FSB synthesis paper that presented several recommendations on how member nations should approach crypto regulations.
According to Chaudhary, the G20 member nations, including India are currently evaluating the “country-specific” risks and benefits associated with cryptocurrencies. Subsequently, the next step would be to coordinate with global “standard setting bodies” before considering any measures.
Chaudhary also did not mention the upcoming discussion paper that will reportedly shed light on the government’s stance on cryptocurrencies.
Last month, Ajay Seth, secretary of Economic Affairs, said an inter-ministerial group comprising multiple regulators is working on a “wider policy for cryptocurrencies,” as per the IMF-FSB guidelines. The paper is expected to be released before September 2024.
Currently, India has a licensing regime in place that the FIU implemented after blocking several foreign crypto exchanges, stipulating that locals are required to report their crypto holdings and pay a 30% tax on capital gains, per a tax law passed in 2022.
The nation is also actively pursuing its central bank’s digital currency, the e-rupee, which achieved 1 million retail transactions in late June. Initially limited to just local banks, the pilot phase now allows applications from payment firms. Notable names like AmazonPay and GooglePay have expressed interest in enabling e-rupee transactions on their respective platforms.