India is making progress towards implementing a regulatory framework for cryptocurrencies, with the aim of introducing legislation within the next five to six months. The government is working on a five-point crypto legislative framework based on the joint recommendations of the International Monetary Fund (IMF) and the Financial Stability Board (FSB). This approach aligns with the recent decisions made by the G20 nations, including India, to welcome and regulate cryptocurrencies.
The IMF-FSB recommendations advocate for regulating the crypto market rather than imposing a blanket ban. These recommendations serve as guidelines for G20 countries to develop their own collaborative yet independent crypto legislation. To gain insight into India’s crypto approach, Cointelegraph reached out to Crebaco, a blockchain analytics firm that has worked with various G20 committees and nations. According to CEO Sidharth Sogani, the Indian government is focusing on global collaboration and considering aspects such as crypto taxation.
The five-point framework being developed by the Indian government includes the following measures:
1. Implementing advanced Know Your Customer (KYC) protocols for crypto companies, which adhere to the Foreign Account Tax Compliance Act and existing Anti-Money Laundering standards.
2. Requiring crypto platforms to provide real-time proof-of-reserve audits to regulators.
3. Establishing a uniform taxation policy for cryptocurrencies across the nation.
4. Granting crypto exchanges a similar status to authorized dealers, similar to banks, under the guidelines of the Reserve Bank of India (RBI).
5. Considering the introduction of key positions, such as a Money Laundering Reporting Officer, for crypto platforms.
Sogani emphasized that banning cryptocurrencies is futile, as many countries have recognized the need for regulation. Countries like the United States and Europe already have specific crypto regulations in place, while India has taken a taxation approach. Sogani believes that regulation is inevitable and essential for the growth of the crypto ecosystem, as it reduces the risks of scams and illicit activities.
India has long advocated for a global approach to crypto regulations, as reiterated by Prime Minister Narendra Modi during the recent G20 summit. An executive at the finance ministry confirmed that India has embraced the IMF-FSB crypto recommendations and intends to formulate regulations based on them in the coming months. The official stated that these recommendations provide a suitable framework for India to decide its own approach to cryptocurrencies.
The finance ministry also emphasized that banning cryptocurrencies is no longer a viable option. The official acknowledged that while India could choose to ban cryptocurrencies, it would be challenging to do so if other countries continue to embrace them. India currently lacks specific crypto regulations but introduced a 30% tax on crypto gains in 2022. The joint recommendations and the assurance from the finance ministry of the potential for robust crypto legislation in the near future provide optimism for the crypto industry in India.
In conclusion, India is making progress towards implementing a crypto regulatory framework based on the IMF-FSB recommendations. The government envisions a global collaboration approach, with a focus on aspects such as crypto taxation. The proposed five-point framework aims to establish advanced KYC protocols, real-time auditing, uniform taxation, enhanced status for crypto exchanges, and key positions for platforms. The shift towards regulation reflects the recognition that banning cryptocurrencies is not effective, and regulation is necessary for the growth of the crypto ecosystem while mitigating risks.