India is moving closer to shaping its cryptocurrency regulations as the Department of Economic Affairs (DEA) prepares to release a consultation paper expected in September or October. The development comes amid the ongoing controversy around WazirX crypto exchange in India, where investor funds amounting to thousands of crores have been stuck with the exchange.
According to local reports, the paper will gather input from various stakeholders and could set the direction for digital currencies in the country.
The paper is led by the DEA secretary and comes at a time when global scrutiny of cryptocurrencies is increasing. At a G20 meeting last year, Finance Minister Nirmala Sitharaman emphasized the need for international cooperation on crypto regulations, aligning India with the global push for consistent rules.
Moreover, India has already taken some steps toward regulating crypto, such as introducing a 30% tax on gains and a 1% tax deducted at source in April 2022. These measures were the first attempts to bring crypto activities under some control.
Still, the government has focused mainly on preventing illegal activities like money laundering and terrorism financing, rather than directly regulating the buying and selling of digital assets.
The upcoming DEA paper is expected to address concerns from financial authorities like the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI).
SEBI has suggested a multi-layered regulatory approach, where different agencies handle different aspects of crypto. However, the RBI remains cautious, warning that digital currencies could threaten the country’s financial stability.
Additionally, recent government actions, such as a temporary ban on Binance, a major crypto exchange, show India’s strict stance. Although Binance regained access earlier this month by registering with the Financial Intelligence Unit, it still faces an $86 million tax demand from Indian authorities.
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