tl;dr
India is actively developing a regulatory framework for virtual digital assets (VDAs), or cryptocurrency, to balance innovation with investor protection and economic stability. The government is advocating for global collaboration to effectively manage borderless crypto assets and prevent regulatory...
India is actively developing a regulatory framework for virtual digital assets (VDAs), or cryptocurrency, to balance innovation with investor protection and economic stability. The government is advocating for global collaboration to effectively manage borderless crypto assets and prevent regulatory arbitrage. Current regulations place VDAs under the Prevention of Money Laundering Act and subject income from VDAs to taxation.
India has played a leading role in global efforts to establish a coordinated regulatory framework for crypto assets, emphasizing financial stability and investor protection across borders. The government is engaging with stakeholders to gather insights and build consensus on the most effective approach to regulating VDAs, with a discussion paper outlining the regulatory stance expected to be released soon.
India has shown serious intent to develop a regulatory framework for virtual digital assets (VDAs); otherwise, cryptocurrency. The move comes in the backdrop of the surging popularity of crypto assets and their potential impact on the financial system. The government is aiming to strike a balance between innovation, protecting investors, and safeguarding the nation’s economic stability. Recognizing the global appeal of VDAs, India is advocating for international collaboration to establish effective regulations and prevent regulatory arbitrage. This effort is being shaped by both domestic considerations and global regulatory trends.
As of March 7, 2023, India has placed VDAs under the Prevention of Money Laundering Act (PMLA), to address money laundering risks. Additionally, income generated from VDAs is subject to taxation under the Income Tax Act of 1961. The government also leverages the Information Technology Act, 2000, and the Companies Act, 2013, to oversee other aspects of crypto operations. These measures aim to bring transparency and accountability to the crypto market while addressing emerging challenges.
India’s leadership at the G20 Summit of 2023 provided a platform to push for a global regulatory consensus on crypto assets. The IMF-FSB Synthesis Paper and the G20 Roadmap on Crypto Assets were adopted under India’s guidance. These initiatives aim to establish a coordinated global framework for crypto regulation, emphasizing financial stability and investor protection across borders. India’s active participation in these international efforts underscores its commitment to tackling the complexities of crypto regulation on a global scale.
The Indian government has been actively engaging with stakeholders, including industry leaders and international organizations, through both formal and informal consultations. These consultations aim to gather insights and build consensus on the most effective approach to regulating VDAs. A discussion paper outlining the government’s regulatory stance is expected to be released soon. However, a specific release date has not been announced. The government is taking a cautious approach, prioritizing both innovation and investor protection while maintaining financial stability.