The Reserve Bank of India (RBI) is gearing up to introduce their own digital currency, and a new bill is being drafted to pave the way for its regulation. The Cryptocurrency and Regulation of Official Digital Currency Bill will ensure that the environment is suitable for this introduction.
Crypto Regulation India: The New Bill Explained
Cryptocurrency is no longer the latest trend, but many governments still need to decide whether or not it is sensible to incorporate decentralized digital money. India made its opinion known in 2021 in the Lok Sabha – and promised severe penalties for any violations of the regulations.
The Cryptocurrency and Regulation of Official Digital Currency Bill is being drafted to develop a suitable environment for introducing digital currency issued by the Reserve Bank Of India (RBI). On the surface, this may be a good idea, but there are still a lot of questions that still need to be solved, such as:
- What is the current status of the Cryptocurrency Bill?
- When will it be tabled and open for feedback?
- How will it affect industries that rely heavily on cryptocurrency, such as online gambling?
Answers are still forthcoming, but the fact remains that India has shown its commitment to cracking down on cryptocurrency and its associated activities.
What Is The Ministry Of Finance’s Take?
The Ministry of Finance’s representative, Shri Pankaj Chaudhary, succinctly summed up the answer to all burning questions by saying crypto assets are borderless and require international coordination to avoid regulatory inconsistencies.
In other words, any efficient legislation must go beyond national initiatives to consider the potential risks and benefits. This effort must align with global initiatives to stop using digital assets for money laundering, with similar regulative standards suitable for entities like banks and stock brokers.
Canada, for instance, covered entities dealing with virtual currencies under its Money Laundering and Terrorist Financing Act in 2014. South Korea has also seen a surge in investment in its crypto industry in recent years, pushing it to regulate the sector with anti-money laundering protocols.
The Indian public is, however, wondering why the proposed bill was postponed twice, notably with nearly $488 million laundered via crypto transactions in the previous year. This only serves to enhance such worries. Although laundering illegal money can be avoided, the crypto market can bypass government regulations, making it highly attractive to some users.
Still, an unregulated crypto market harbors numerous risks – financial instability, consumer fraud, and the funding of terrorism, to name a few. This is why the Financial Intelligence Unit of India is taking steps to protect young entrepreneurs and investors.
Cryptocurrency Regulation Bill: The Rundown
The bill seeks a beneficial infrastructure for launching the official digital currency by the Reserve Bank Of India (RBI). It also bans any other private cryptocurrencies except those serving to improve cryptocurrency’s underlying technology.
In the Union Budget of 2022, the first steps towards this goal have been taken, with a 30% tax and 1% TDS on profits from virtual digital assets or cryptocurrencies. Before the announcement, India had no Income Tax Act or Goods and Services Tax (GST) defined for these digital assets.
Investors need to report their crypto profits and losses as a part of their income, and a 30% fee will be applied to earnings from transferring digital assets. Additionally, the acquisition cost is the only deduction allowed when reporting virtual asset earnings; a 1% TDS is deducted from the buyer’s payment if it surpasses the threshold limit.
If cryptocurrency is gifted, it is taxed at the recipient’s end. Also, any losses incurred from the virtual asset investment cannot be balanced against other income. Crypto exchanges and entities dealing with virtual digital assets (VDA) must conduct know-your-client due diligence on their users.
Lastly, anti-money laundering provisions must be applied to transactions related to cryptocurrencies or virtual tokens, with a minimum of five years of records maintained for all transactions over $12,200.
So, Is Cryptocurrency Legal in India?
Any central body does not regulate cryptocurrencies, so there are no laws to address any issues arising from trading in them. The Union Budget 2022 announcement offers some guidance on the taxation of these digital assets, but further clarification from the government is needed to decide their legality.
Some states, such as Karnataka, are considering legislation to regulate cryptocurrency transactions within their jurisdiction. This indicates that despite the challenges surrounding regulation and enforcement, there is potential for the continued growth of cryptocurrencies if appropriate measures are taken to ensure consumer protection and financial stability.
What Does the Future Hold?
In India, no laws specifically address the use of Bitcoin in gambling. However, the government is in the process of exploring the possibility of regulating cryptocurrencies. For now, the legal status of Bitcoin gambling remains unclear.
However, gambling is illegal in most of India’s states except for Goa, Sikkim, and Daman, where land-based casinos are allowed. This means that online gambling, including with Bitcoin, is usually in a grey area – a situation that works for crypto users’ benefit. As a result, Bitcoin online gambling is widely available to anyone interested.
The Indian government’s decision to regulate cryptocurrencies led to a sharp drop in trading volume in just 10 days, and it continued to decrease by 90% in the following months. This prompted many crypto companies to shift their operations to other countries like El Salvador and Dubai, where digital assets are more widely accepted.
According to a Dubai DMCC Free Zone report, 16% of new businesses registered in the first quarter of 2022 were related to cryptocurrency or blockchain. Many Indian citizens have also left the country in search of better opportunities.
The government has recently taken measures to curb crypto-related advertising, such as banning women’s cricket league sponsorships. On the international front, the Indian finance minister, Nirmala Sitharaman, called for the global authorities to collaborate in regulating cryptocurrencies at a G20 meeting.
The crypto industry responded positively to the Indian government’s inclusion of crypto transactions in its money laundering laws. Ashish Singhal, co-founder and CEO of CoinSwitch, a leading Indian crypto exchange, said that this was a sign of recognition of the sector and would help prevent digital assets from being misused.
Cryptocurrency has made its mark in India, but the regulatory landscape is less than ideal. This lack of clarity could be potentially hazardous for crypto traders and investors. On the other hand, gamblers are in luck.
Investing in digital currencies will remain high-risk until India enacts more concrete cryptocurrency regulations. Despite this uncertain atmosphere, some investors spot opportunities amid the commotion. Online casinos are among the first to take advantage of this, so it’s no wonder they are still flourishing.
Cryptocurrency has become a part of India, yet the regulatory environment needs to catch up. This absence of clarity may present numerous risks to crypto traders and investors. Yet, for gamblers, there is still hope. Only when more concrete regulations regarding cryptocurrencies are established in India investing in digital currencies will stay risky.
Despite this, some people still see potential amid the turbulence. Online casinos are among the first to capitalize on it. Thus, it is no surprise that they continue to thrive.