IndiaTech, an industry body which works with startups and their investors, has written to the government suggesting that cryptocurrencies should be regulated, but encouraging its usage as an asset and highlighting its potential in boosting India’s economy.
IndiaTech’s recommendations include defining crypto assets as property similar to gold and stocks, recognizing only those currencies which can be traced, bring it under capital gains for income tax purposes and bringing it under the ambit of the money laundering laws.
Moneycontrol has seen a copy of the recommendations made to various government departments and the Reserve Bank of India.
All the suggestions include cryptocurrency as an investment option and not as a currency, the way it has been used in some other countries.
“Crypto has a bright future in India. It is the sector that is inevitably at a unique stage to attract FDI, generate employment at the same time foster innovation which puts India on a global map. There is potential that needs to be rightfully tapped for India to see several startups grow out of this sector,” IndiaTech’s proposal said.
“There are associated risks as with any other financial instrument or asset which can be addressed with policies and regulations that do not stifle the underlying innovation that these emerging technologies are built upon. India needs to embrace crypto and create an enabling regulatory environment for the sector to take off the way it is meant to in a transparent manner,” it said.
These are some of the key recommendations made-
-Introduce sufficient checks and balances with reporting mechanisms, accounting standards, enable traceability and combat money laundering and potential terrorism financing.
-Allow direct and indirect taxation, encourage disclosure and imports. Under income tax, crypto gains can be taxed under capital gains or income from business and profession, while under the Goods and Services Tax (GST), GST should be levied on the brokerage or exchange fees (like it happens in stock markets) and not on the transaction value. The potential GST collections from this could range between Rs 200-600 crore in the next 12 months.
-Crypto exchanges need to ensure that the underlying blockchain code, and bitcoin tokens are robust. The industry needs a crypto-specific framework that can protect retail investors from the risks associated with tokens.
-Crypto companies may have to be run by an Indian founder in India. They need to be registered and accepted in India, rather than paying foreign exchanges to store Indian users’ currency. Indian founders or entities should hold a minimum of 24 percent in the company, meaning a maximum Foreign Direct Investment of up to 76 percent of a company, similar to the banking sector.
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First Published: May 7, 2021 1:34 PM IST
