Regulations on cryptocurrencies to not succeed without global consensus, DEA Secretary Ajay Seth says

Economic Affairs Secretary Ajay Seth said that a local response might not produce the desired results since cryptocurrencies are traded on the internet and not tied to a jurisdiction.

"Regulation or ban whatever it is, appropriate policy response to crypto-assets is in the making. How long, I am unable to put a finger on. I don't see this happening in the Budget session for sure. The work is in progress," he said when asked whether the government would come out with a regulation on private cryptocurrencies in the ongoing Budget session of Parliament.

Additionally, he said discussions on regulating cryptocurrencies would begin at the G20.

"Whatever regulations are brought in, unless there is a global consensus, they won't succeed. It may succeed 80-90 per cent, but it will not be a comprehensive solution. So at this point of time, we are interacting with various stakeholders, especially the institutional stakeholders and not crypto stakeholders.

"Stakeholders which have the mandate on monetary policy, fiscal policy, financial stability and development economics are in touch... I do expect that in the current year, the discussion would be starting in the G20 forum on the appropriate global response to crypto-assets," he told PTI in an interview.

G20's first meeting of Finance Ministers and Central Bank Governors under Indonesia's presidency is set for February 17. G20's second meeting will take place in April, followed by a third in July.
As part of the Budget, Seth added, two actions have been announced, including promoting digital currency through the central bank and amending the RBI Act as required.
Thus, he said, the digital currency promoted by RBI will be a reality in 2022-23, as announced in the Budget by Finance Minister Nirmala Sitharaman.
"Digital currency will also lead to a more efficient and cheaper currency management system. It is therefore proposed to introduce digital rupee using blockchain and other technologies to be issued by the Reserve Bank of India, starting 2022-23," Sitharaman said in her Budget speech.

Blockchains are basically digital ledgers that record transactions that can be tracked.

Seth said the second measure is regarding tax implications relating to crypto-assets, although he added that having tax clarity does not mean the government has legitimized it, according to a report by PTI.

"Every income is acceptable (for taxation purposes) except exempted income like agriculture. Budget has brought that clarity, plus the tracing mechanism through TDS has also been provided," he added.

In the Budget, a 30 per cent tax has been proposed on income from transactions in these assets, and a 1 per cent TDS (tax deducted at source) on transactions in these asset classes above a certain threshold to trace the source.
A new tax will be imposed on gifts in crypto and digital assets, the Budget announced.

Currently, no restrictions or bans exist in the country regarding private cryptocurrency trading.

The government in December had expressed its intention to bring a bill on cryptocurrency seeking to "create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India" in the last session of Parliament.

However, it could not be introduced as the Cabinet had not cleared the draft bill.

As private cryptocurrencies could have implications for national security as well as financial stability, the RBI has been vehemently opposed.

A recent survey shows that central banks, facing dwindling usage of paper money, are trying to popularize electronic money (like Sweden). In addition, jurisdictions with significant physical cash usage are seeking to make issuance more efficient (such as Denmark, Germany, Japan, and the US).

Even the RBI believes that globally coordinated action is necessary and that central banks need to come up with digital currencies to meet public needs and prevent any harm caused by the use of private virtual currencies.

(With Inputs from PTI)