The Indian government has not set a definitive timeline to finalize regulations for virtual digital assets (VDAs), including cryptocurrencies. This information was shared by Pankaj Chaudhary, Minister of State (MoS) Finance, during a Lok Sabha session on Monday. Chaudhary highlighted the complexities of regulating the borderless nature of VDAs, emphasizing the need for international collaboration in shaping effective policies.
Current Status of VDA Regulation in India
In response to questions from Members of Parliament Appalanaidu Kalisetti and Lavu Sri Krishna Devarayalu, the MoS Finance explained that establishing a comprehensive framework for VDAs requires an in-depth evaluation of:
- Taxonomy standards for categorizing digital assets.
- The risks and benefits associated with VDAs.
Chaudhary stated, “There is no specific timeline for publishing the Discussion Paper or finalizing the process, as it depends on evaluating risks and determining appropriate stances. Balancing investor protection with innovation is crucial while safeguarding the Indian economy from the risks posed by the VDA sector.”
Global Cooperation Essential for Crypto Regulation
The MoS Finance reiterated the importance of international cooperation in framing VDA regulations. All jurisdictions, including India, are expected to:
- Assess their country-specific risks.
- Engage with global standard-setting bodies and platforms like the G20 to develop harmonized approaches.
Chaudhary also mentioned that a Discussion Paper might be released to seek public feedback on proposed regulatory measures.
Steps Taken Toward Crypto Regulation
The Indian government has been gradually working toward regulating the VDA sector:
- Taxation Framework:
- 30% tax on crypto income.
- 1% TDS (Tax Deducted at Source) on each transaction, a policy that crypto firms have urged the government to reconsider.
- Registration Mandates:
- The Financial Intelligence Unit (FIU) requires all VDA firms to register to legitimize operations.
- Crypto firms must comply with anti-money laundering (AML) laws to prevent illicit fund transfers.
- G20 Presidency Initiatives:
During its 2023 G20 Presidency, India played a pivotal role in encouraging global collaboration on unified VDA regulations. Work on these frameworks is ongoing.
Feedback and Future Outlook
In July, Economic Affairs Secretary Ajay Seth announced that the government’s upcoming Discussion Paper would include recommendations for regulating the crypto industry. Feedback from industry stakeholders has been sought to ensure the sector’s growth aligns with national financial security standards.
Global Comparison of Crypto Regulations
While India is still drafting its regulatory framework, other regions have made significant strides:
- UAE and European Union: Comprehensive crypto regulations already in place.
- United Kingdom: Detailed guidelines for VDA firms expected by 2026.
India’s cautious approach reflects the complexity of balancing innovation with economic security. While no specific timeline has been set, the government’s commitment to international collaboration and stakeholder engagement highlights its intent to develop robust VDA regulations.
