The Indian government is stepping up efforts to regulate cryptocurrencies, marking a significant move toward creating a structured framework for Virtual Digital Assets (VDAs). Recent parliamentary discussions shed light on plans to balance innovation with investor protection while addressing the global and borderless nature of cryptocurrencies.
India’s Comprehensive Crypto Framework
India aims to establish a robust regulatory structure for VDAs, with a focus on international cooperation. This would help prevent regulatory loopholes and ensure a consistent approach globally.
However, officials noted that such a framework requires international cooperation, as VDAs transcend national boundaries.
Current Rules and Taxation Updates
The government has already implemented key measures to regulate VDAs:
- Anti-Money Laundering: VDAs have been governed under the Prevention of Money Laundering Act (PMLA) since March 2023.
- Taxation: Income from VDAs is taxable under the Income Tax Act, of 1961.
- Additional Oversight: Activities involving VDAs are also regulated under the Information Technology Act, of 2000, and the Companies Act, of 2013.
Adding clarity to the tax treatment of cryptocurrencies, the Income Tax Appellate Tribunal (ITAT) in Jodhpur recently ruled that cryptocurrencies are considered capital assets. This decision means profits from cryptocurrency sales should be taxed as capital gains rather than income from other sources.
The ruling is particularly significant for transactions conducted before the government introduced specific regulations for VDAs in 2022.
Global Leadership Through the G20
During its G20 presidency in 2023, India played a pivotal role in advancing international crypto regulations. The adoption of the IMF-FSB Synthesis Paper and the G20 Roadmap on Crypto Assets provided a global blueprint for crypto governance.
The government plans to release a discussion paper to outline its approach to crypto regulations and seek feedback from stakeholders. While no timeline has been confirmed, this step could help refine the regulatory landscape.
Addressing Key Challenges
India faces unique challenges in regulating VDAs due to their borderless nature. The government is working to safeguard the economy and financial stability while fostering innovation in blockchain and crypto technology.
By combining domestic efforts with global collaboration, India is laying the foundation for a secure and innovative future in digital assets.
