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FM’s Cryptocurrency Warning: What Do Cryptocurrency Players Think?
The Indian government remains cautious about cryptocurrencies despite the rise in the value of Bitcoin. At the India Today Conclave held recently, Union Finance Minister Nirmala Sitharaman highlighted the dangers associated with unregulated cryptocurrencies. She emphasized on the risk of illicit activities such as financing terrorism and drug trafficking due to inconsistent regulation across countries.
In this article, we look at the Finance Minister’s remarks regarding the classification of cryptocurrencies as an emerging asset class, examine the sentiments of crypto stakeholders, and discuss India’s current strict stance on cryptocurrencies.
Responding to a question on the resilience of Bitcoin, Sitharaman said the government’s consistent stand has been that assets formed under the umbrella of cryptocurrency can serve various purposes, such as trading, speculation, generating profits, etc.
“We have not regulated them, and we are not regulating them today. But it cannot be a currency, that is what I have always maintained, and that is the position of the Indian government. Currencies have to be issued in fear of the government or the central bank, so that is a different story. So if they come back, this resurgence, it is the asset that is created for speculation or for trade or for whatever reason, and that is still not regulated in India. And that is why we thought it was appropriate to raise this issue within the G20 forum, because since it is so technology-driven and it will impact cross-border payments and so on, if one country regulates and others do not, it will be an easy way to move money for drugs or drug financing or even terrorism and so on. So we wanted to create some kind of framework by taking it to the G20 level. “This has been very well received and I am sure a framework will emerge,” the foreign minister said.
Although cryptocurrencies are approached with caution, it is important to consider the views of industry players.
Sumit Gupta, Co-Founder of CoinDCX
“People all over the world are looking at cryptocurrency as a store of wealth, a credible and future-ready asset class that helps them protect their wealth and hedge their investments. We are in sync with the government and agree with the Finance Minister’s statement that cryptocurrency cannot be treated as a currency. We have always maintained that cryptocurrency is an asset class and our demand has always been to get regulatory clarity from this perspective. Moreover, we also need to understand the value that this technology brings. This was also highlighted by the recent statements of SEBI Chairman and Uday Kotak when he drew attention to the emergence of an alternative market and how it is being legitimised by the US, UK and Europe as an important part of their future. Given that cryptocurrency developments are agnostic to geography, it will require global policymakers to come together to comprehensively regulate and more effectively protect consumer interests. Global cooperation is not only necessary, but essential given the rapid pace at which cryptocurrency is developing as well as the cross-border nature of the asset. Rather than having multiple jurisdictions working in silos toward a common goal, the benefits of global cooperation include shared resources, targeted knowledge exchange, and accelerated learning toward an optimal regulatory framework by reducing regulatory arbitrage.
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Rajagopal Menon, Vice President, WazirX
“Traditionally, cryptocurrencies have been viewed with suspicion by the Indian establishment, which feared that cryptocurrencies would become a parallel currency to the Indian rupee. The Indian crypto industry is very clear that we do not want to become an alternative payment platform. It simply does not make sense because Indian payment systems are the most advanced in the world. In the first quarter of FY2023-24, the transaction volume reached 24.9 billion and the transaction value reached 39.7 trillion rupees. Our demand has been to treat cryptocurrencies as an investment, an asset or a security. The government has also taken a practical position, by introducing taxation and then bringing cryptocurrencies under the purview of the FIU. We are hopeful that once the new government is in office, we will see the regulations taking shape because India is a signatory to the Delhi Declaration which obliges G20 countries to put regulations in place by 2025.”
Rahul Pagidipati, CEO of ZebPay
“The Indian government’s stance on Virtual Digital Assets (VDA) has remained largely unchanged since the announcement of the tax rules. While this has had a dampening effect on participation in the sector, both from an investment and innovation perspective, it is a progressive step towards regulation, which is the need of the hour. We hope that the discussions initiated at the G20 Summit will yield fruitful outcomes, with the international community now closely involved in shaping a technology-driven regulatory framework. Additionally, a reduction in capital gains taxes and TDS will encourage greater participation from retail and institutional investors, paving the way for sustainable growth in the sector.”
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Ashish Singhal, Co-Founder of CoinSwitch
“India’s response to crypto is very nuanced and thoughtful. As the Finance Minister recently reiterated, the existing rules treat crypto as a virtual digital asset and not a currency. India is right on this approach. In India, users trade on VDAs for capital gains. He or she does KYC, pays advance taxes if applicable, and pays tax on profits earned on VDAs. This means that an Indian user treats crypto like any other investment instrument in their portfolio. CoinSwitch agrees with this: we view crypto as an asset class for wealth creation. That said, we would like to see taxation on crypto come down to par with other asset classes. There is no demand for crypto use cases as a currency. Currency is a sovereign prerogative and India’s payment infrastructure is sufficient and even ahead of much of the world. The government’s approach to crypto should be seen in this light: it has clarified the processes and guidelines that a user and platform must follow on using crypto as a VDA, while protecting its sovereign interest.”
Kumar Gaurav, Founder and CEO of Cashaa
“The views expressed by the Indian Finance Minister may seem daunting at first glance, but if you delve deeper into what has been said, it is evident that regulating the cryptocurrency market is well within the government’s thoughts and workings. The government wants to treat cryptocurrencies as an asset class, an investment vehicle for wealth creation and not as a substitute currency. We welcome this approach, at least in the short to medium term. The regulation will bring clarity, certainty and confidence in cryptocurrencies not only for the average Indian user but also for crypto businesses and investors. This, coupled with the rationalization of TDS and capital gains taxes on cryptocurrencies, can usher in a new era of innovation and growth in the cryptocurrency market in India, which can also boost the nation’s economic growth.”