Budget 2021: Cryptocurrency sector wants recognition, framing of rules, regulations

Union Budget 2020-21 Expectations of the cryptocurrency sector: The Supreme Court may have quashed the Reserve Bank of India (RBI)-imposed ban on holding and transacting cryptocurrencies in India, but the top court has failed to alleviate the fear of crypto players. This is because lack of regulations always leads to uncertainty which is a potential death knell for any business. Billions of dollars invested in a sector where there are no regulations may get vanished in a few days if the State decides to ban the business.

However, in case proper regulation is there and the business is recognised by the government, a sudden banishment is out of question. The investors and other stakeholders are assured of the continuity of the business. The State has another source of revenue with a business that legitimately adds to the GDP of a country.

Specifically in terms of crypto assets, bringing in regulations will not only give the much needed recognition but ensure a future to the sector. The intended representation aims to propose firstly a modification in the existing laws such as FEMA and SEBI to regulate the flow of money and the option of raising capital. Similarly, amendments in the Income tax and GST laws are needed to bring clarity on the applicability of tax and finally IPC along with IT laws would recognise specific acts as offences in order to impose penalties.

“We don’t expect the Government to recognise crypto currencies as legitimate currencies. Nonetheless, given the fact that the business of crypto assets have expanded manifolds within the country, we expect the government to make few announcements on recognising them as tradable commodities and provide clarifications in terms of applicability of tax. In addition, usage of blockchain technology for many Government records is also a much awaited announcement,” said Rashmi Deshpande, Partner, Khaitan & Co.

It is expected that a full-fledged legislation will be introduced specifically for crypto-assets and blockchain technology. If such a legislation is announced, India will perhaps become the first country to bring in concrete laws on crypto assets.

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“The convenience, safety, options, and growth will only increase if the economy begins to accept the new solutions. Now that SC has removed the ban, we expect the government to consider allowing a self-regulatory system for the cryptocurrency sector so that users gain more clarity and we take another step towards strengthening the larger aim of digital India,” said Kumar Gaurav, CEO and Founder, Cashaa.

Vikram Subburaj, Co-Founder and CEO of Giottus Cryptocurrency Exchange says, ‘‘We want the government to look at cryptocurrencies as an opportunity to make India a leader in a futuristic industry similar to how Chinese are dominating the AI industry now. While it is not possible to implement comprehensive laws in one go, we will have to make progressive laws with frequent revisits to enhance the regulations. Cryptocurrency exchanges can be the first point of regulation by bringing them under SEBI through a sandbox regulation setup. Exchanges could be directed to follow the Financial Action Task Force (FAFT) cryptocurrency guidelines to tackle AML & Terrorist funding worries. Further regulatory efforts could be on dealing with ICOs by building frameworks to segregate tokens as Securities or Utility tokens based on the characteristic of the ICO.”

Nischal Shetty, CEO, WazirX is optimistic that cryptocurrency sector will help in economic revival if nurtured properly.

“The pandemic has had a terrible impact on the global economy including India. I’m optimistic that the budget will focus on reviving our economy. In 2020, the Supreme Court of India quashed the banking ban on crypto in India. This historic verdict is a beacon of hope for crypto ecosystem, and shows the potential of the technology. Moreover, during the pandemic-induced lockdown, most of the once-thriving industries have been in shambles, and crypto and blockchain have been the only sunrise sector that has created jobs,” said Shetty.

“I’m sure that our government will take notice of this innovative technology and its potential to contribute to our $5 trillion economy vision. I’m confident that 2021 is going to be the year when we get positive crypto regulations in India. Looking around, positive regulation is already in the works in developed nations like US and EU, and India will not stay behind. The entire crypto industry is hoping that our FM announces steps towards positive crypto regulations in India this budget 2021,” he added.