India: Legal experts divided on pre-budget crypto-wishlist ahead of Union Budget

Previous reports have clarified that it is unlikely that a comprehensive crypto-bill will be introduced in the Parliament for the upcoming Budget Session on 1 February.

However, the crypto-industry in India remains both hopeful and divided about it. Local media reports suggest that one section of legal experts wants the government to break the status quo to introduce clear guidelines for the crypto-sector. On the contrary, the other wants the government to wait and discuss the definition and use cases that would apply to each crypto-instrument.

Wait-and-wait approach?

While speaking to a news publication, ICICI Bank’s group general counsel Pramod Rao commented,

“The government’s pause is a good thing for us to wait and watch, and decide whether we need a separate regulator, which can transcend into all use cases.”

His comment is regarding the government’s decision to push the much-awaited crypto-bill last year as well for the second time. The crypto-bill was supposed to be tabled in the Winter Session of the Indian Parliament that kickstarted on 29 November and concluded on 23 December 2021.

Additionally, it was assumed that the Securities and Exchange Board of India (SEBI) will oversee the country’s crypto market and no new regulator will be introduced for the sector.

Want for regulatory clarity

Having said that, Sriram Chakravarthi, partner at Singapore-based law firm Rajah & Tann, said it’s time for some clarity. He noted,

“It is better to have a process of constant evolution, consultation and then come up with guidelines, etc, and looking at how they work rather than the wait-and-watch approach.”

As far as industry representatives are concerned, Sharan Nair, Chief Business Officer at CoinSwitch Kuber, told AMBCrypto that leading crypto-exchanges follow strict self-regulatory practices to ensure customer protection.

With respect to the budget, he said,

“We hope the upcoming Union Budget will bring in regulatory clarity and help standardize best practices, address misconceptions around this emerging asset class. We believe a regularised environment will encourage more Indians to start their crypto investing journey, promoting financial inclusion in line with the government’s vision.”

Consequences of a missing framework

Just last month, major cryptocurrency service providers came under the regulatory radar for suspicion of possible tax evasion. And, without clear guidelines, both Indian investors and crypto-businesses are maintaining a cautious outlook. An earlier report had cited that the buying intensity among Indian crypto-investors and traders is lower this time around.

This, in comparison to all other dips that the market witnessed, as the uncertainty in the sector prevailed.

However, what we can expect in the budget are tax-related announcements. Suman Banerjee, CIO, Hedonova told us that,

” The introduction of a special regulatory and taxation regime for cryptocurrencies and central bank digital currencies to cover various aspects can be expected. I expect cryptocurrencies to be taxed as capital assets and a sale tax of 30% similar to winning the letters can also be expected.”

That being said, five Indian states are heading for Assembly elections in 2022. And, if media reports are to be believed, the government does not want to “rush” with crypto-bill before the elections. It is speculated that the administration will work on a crypto-ordinance after the state elections.