No immediate plans for crypto regulations in India, says Minister of State

Indian Finance Minister Pankaj Chaudhary said that the country is not considering regulating the cryptocurrency sector in the near future.

Chaudhary’s comments came in response to questions posed to him by Member of Parliament GM Harish Balayogi, who was aiming to clarify the government’s stance on cryptocurrencies.

The MP asked specifically about the extent of research or initiatives the government has undertaken to understand the crypto sector and whether any future legislation is planned on the subject.

Chaudhary, in a written reply on August 5, said there was “no proposal” under the Indian constitution to regulate the “sale and purchase” of cryptocurrencies, which he calls virtual digital assets.

Regarding setting up a surveillance mechanism to monitor the industry, Chaudhary said the Financial Intelligence Unit is “authorised” to designate Virtual Digital Asset Service Providers as reporting entities.

According to the FIU, these entities are businesses that are required to comply with the provisions of the Prevention of Money Laundering Act (PMLA), 2002. This move allows the regulator to keep a check on illegal activities such as money laundering and financing of terrorism.

The minister further added that despite the absence of a robust regulatory framework, law enforcement agencies comprising regulators like the Reserve Bank of India are equipped to investigate and take action against illegal activities under existing laws.

One of these institutions, the Directorate General of GST Intelligence, recently sent a show-cause letter to Binance, ordering the exchange to pay taxes worth $86 million.

Regarding the investigation into the government’s research work, Chaudhary said that the government does not collect any data on cryptocurrencies, saying it is an “unregulated” sector.

The state minister also pointed to the G20 Roadmap on Crypto Assets, which was adopted by the G20 member countries last year under the chairmanship of India. The roadmap stemmed from a joint IMF-FSB synthesis document that offered various recommendations on how member countries should approach crypto regulation.

According to Chaudhary, G20 member countries, including India, are currently assessing the “country-specific” risks and benefits associated with cryptocurrencies. The next step would then be to coordinate with global “standard-setting bodies” before considering any measures.

Chaudhary also did not mention the upcoming discussion paper that is said to shed light on the government’s stance on cryptocurrencies.

Last month, Economic Affairs Secretary Ajay Seth said an inter-ministerial group comprising multiple regulators was working on a “broader policy for cryptocurrencies,” as per IMF-FSB guidelines. The document is expected to be published before September 2024.

India currently has a licensing regime in place after the FIU blocked several foreign cryptocurrency exchanges, which requires locals to declare their crypto assets and pay 30% tax on capital gains under a tax law enacted in 2022.

The country is also actively pursuing the central bank’s digital currency, the e-rupee, which reached 1 million retail transactions in late June. Initially limited to local banks, the pilot phase now allows applications from payment companies. Notables such as AmazonPay and GooglePay have shown interest in enabling e-rupee transactions on their platforms.