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CRYPTO CONUNDRUM: BAN OR LIMITED NOD CRYPTO CURRENCY

Article  in  The Management Accountant Journal · April 2023

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 CRYPTO CURRENCY

CRYPTO CONUNDRUM:
BAN OR LIMITED NOD
Abstract

This article tries to find out the current

concerns regarding the crypto currency. India
has been engaged in a fierce debate over crypto
currency. In India, crypto currency has been
treated very conservatively, with the RBI
imposing a ban. Although the ban has been Dr. Rajni
reversed, the central bank’s position has not Associate Professor
changed. India is on a dual path of trying to Bharati College, University of Delhi
Delhi
regulate or even ban crypto currencies while [email protected]
at the same time encouraging the use of block
chain technologies. The Government of India
adopted a conservative stance on taxation
by announcing a flat 30 per cent tax rate on
income from digital virtual assets, or crypto,
in the Budget 2022. The Government has
also launched e rupee. One of the issues in
G20 summit in September,2023 is regulation
of crypto currency. But still, it’s impossible
to predict when or in what form the crypto Dr. Vandana Bansal
Associate Professor
law will get through in India’s Parliament. Bharati College, University of Delhi
Different countries have their own ways of Delhi
regulating crypto currency, but it is safe to [email protected]
say that India has so far been among the most
closed to crypto currencies. Considering the
global nature of trade nowadays even an
international crypto currency can be evolved
& regulated by international agencies like
IMF and World Bank.

C
INTRODUCTION
rypto currency is a digital currency which is used
as a medium of exchange through a computer Dr. Divya Sharma
network. Crypto currency is an ever evolving and Assistant Professor
constantly changing technology that calls for a Bharati College, University of Delhi
collective global response for regulatory action of ever-changing Delhi
technology and technology-driven payment systems. In recent [email protected]
years, virtual currencies have become widely used by a wide
range of systems [4]. In the e-business and e-commerce but they could change the way global markets interact due
industries, exchanging virtual currency for real currency is a hot to their internet connectivity, removing barriers between
topic. It has been noted by authors that trading crypto currency normative national currencies and exchange rates [5]. Block
for money is outright prohibited in certain countries and either chain technology can have wider applications across many
permitted or unregulated in others [6]. Crypto currencies are segments of the economy, most notable in financial services.
unlikely to become a replacement for traditional fiat currency, Some countries might not support its use because of its lack

www.icmai.in April 2023 - The Management Accountant 53

 CRYPTO CURRENCY

of control and illicit connections, but “illegitimate untraceable transactions” restricted.

many have introduced regulations in an and this could “substantially reduce
effort to reduce its use. Government of regulatory effectiveness.” Some TAXATION OF
India has been rumored to be prepared have raised issues regarding national CRYPTOCURRENCIES
to ban all private crypto-currencies, but security if crypto currencies are allowed. The Government of India adopted
allows for some exceptions in order to Concerns were raised over how in most a conservative stance on taxation by
promote its application and underlying cases cyber hackers and several others announcing a flat 30 per cent tax rate
technology [1]. A legal status for bitcoin always demanded money in crypto on income from digital virtual assets,
will require that businesses accept it currencies following cyber-attacks. or crypto, in the Budget 2022–23 The
as a means of payment alongside fiat Many stakeholders have said that only revenue from the transfer of virtual
currencies - such as the dollar, the rupee, way crypto currencies can be allowed digital assets will now be subject to a 30
etc. that too limitedly is if it is completely per cent tax, and losses cannot be offset
traceable. RBI has also raised concern against any other income. Furthermore,
OBJECTIVE OF THE STUDY over the impact on foreign exchange. the recipient would be taxed if they
The G20 is led by India from The only way such transactions can received presents in the form of virtual
December 1, 2022, to November 30, be fully traceable is if the KYC of digital assets. Except for acquisition
2023. India will hold 40 meetings across everyone involved in the transaction is costs, no deduction for any expense
the nation as part of its G20 presidency’s known to the regulators. “That is from or allowance shall be permitted when
finance track. Crypto currencies and their the person buying crypto currency in calculating such revenue. The finance
regulation are one of the topics that will India, exchanges and corresponding minister also suggested including TDS
seller outsides India should submit their at a rate of 1 per cent of any payment
be discussed. Since the Government
KYC details. Many officials also feel made in connection with the transfer of a
intends to introduce a Bill on crypto
that only those crypto currencies that virtual digital asset above a certain level.
currencies in Parliament, there has been
a heated debate about crypto currencies are mined in India should be allowed. In India, the Government aims to track
in India recently. The Finance Ministry the income from crypto currency and
has already imposed a 30 per cent tax TREATMENT OF CRYPTO OR investments both within and outside
on income from crypto currency from DIGITAL ASSETS/TOKENS the country.  It is also suggested that
thye assessment year 2022-23. As per There has been a major confusion over a few provisions of the Income Tax
the statement of the Finance Minister crypto assets in India due to multiple Act be amended to include words like
Ms Nirmala Sitharaman there was a messaging by different stakeholders. crypto currency, crypto assets, and
need for taxation on income earned on The Confederation of Indian industry digital currency. The Government is
also looking to amend foreign asset
crypto currencies as income was being stated that the Government should treat
disclosure norms so that Indians will
earned from these currencies. There was crypto or digital tokens as a special class
have to declare overseas, whether they
no need to wait for any law to be framed of ‘securities. In the context of crypto/
hold crypto currency. Thus, those filing
to regulate crypto currencies to impose digital tokens, the provisions of existing
tax returns will be required to disclose
tax. Many crypto currency scams like securities laws should not apply, and
their crypto currency investment and
bitconnect, Morriscoin, Ether Trade a new set of securities laws should be
trading income specifically.
Asia, gainbitcoin, regalcoin, dekado, developed and implemented that is
Karnataka Bitcoin scam have taken appropriate to the context of crypto/ We are waiting to see what the
place in India. Indian citizens have lost digital currencies and their jurisdiction- government will do to regulate crypto
over INR 72,000 Cr in these scams. In less, decentralized nature. The regulatory exchanges, clarify the non-fungible token
the wake of all these developments this focus would primarily be on dealing (NFT) and block chain technologies, as
research study will try to find out the and custody, rather than on issuances, well as the transition period for crypto in
India and holdings outside the country.
current concerns regarding the crypto except where issuance entails an Initial
currency in India and putforth some coin offering to the public by an issuer
LAUNCH OF E-RUPEE
suggestions for its regulation. established in India. The CEI suggested
that the Government could establish On December 1,2022 the Reserve
CONCERNS ABOUT CURRENT centralized exchanges and centralized Bank of India has launched e-rupee,
FORM OF CRYPTO CURRENCIES custody providers under SEBI. a digital currency which is backed by
block chain technology. e-Rupee is
In its current form, crypto currencies The Government of India is yet to fiat currency backed by central bank
pose a “systemic risk” not only to disclose its official position on block of the country and is just like cash, the
security but even to the Indian economy, chain products. Technology backed by only difference being that it is a digital
according to several Financial Ministry cryptography will be critical in the future currency
officials, the RBI, tax departments, and we need to understand how the
. It is CBDC – Central Bank Digital
and even the financial intelligence unit Government will regulate it. A question
Currency in the form of tokens having
(FIU). Many officials have also raised that needs to be answered is whether
same denominations as current paper
concerns over how crypto currencies crypto assets can be purchased outside
currencies. e-Rupee is very safe as it
are used and in case of a law allowing India by using the liberalized remittance
is based on block chain technology;
them will be continued to be used for scheme (LRS) route, or if this will be
can be instantly transferred as there is

54 The Management Accountant - April 2023 www.icmai.in

 CRYPTO CURRENCY

no involvement of intermediaries like SUGGESTIONS

bank, no need of printing or managing e-Rupee is fiat i. Crypto currencies have their
the currency notes. Payments can be own set of advantages and
made through QR codes at merchant
currency backed by
central bank of the disadvantages. The issue of
locations or from one wallet to another. crypto currencies is a cheaper
country and is just way of issuing currency in the
REGULATION OF CRYPTO like cash, the only country as it is digital wallet
EXCHANGES and does not require printing of
Currently there are around 25-30
difference being
currency and is also a safer mode
Indian crypto exchanges, all almost that it is a digital as compared to printed notes as
offering similar services and backed currency legal tender.
by similar technology. Crypto
ii. The theme of G20 summit is
currency exchanges may be required virtual currencies, crypto currency “Vasudhaiva Kutumbakam”
to seek licences from the designated exchanges have turned to targeted which means “One Earth. One
regulators, as is the case with equity advertising and marketing campaigns
and commodity trading platforms, to Family, One Future” which
[3]. During March 2021, exchanges is based on Maha Upanishad.
ensure full oversight of the digital assets. experienced unprecedented growth
They will be subject to net-worth norms Keeping this motto in mind, the
and most of it was due to young people G20 countries may delve upon
and have to meet ’fit and proper’ criteria coming from smaller towns in India,
like other exchanges under the proposed ‘one digital currency’ in all the
who had little experience with the asset
law. Crypto platforms would need to countries issued on the basis of
class and were attracted by ad campaigns
meet the minimum eligibility criteria gold reserves. The trade amongst
featuring celebrities and to become
like governance guidelines, and they these countries can be done in
overnight rich with small investments. 
may also need to present a business terms of that digital currency
Some advertisements of the crypto
plan to satisfy the concerned regulator thereby removing the problem
currency had been indicating as if it’s
about long-term sustainability,”. Several like a deposit and said that the returns of fluctuations in exchange rates
platforms such as CoinDCS, WazirX are four times that of fixed deposit rates. of trading countries.
and Zebpay facilitate trading in crypto Especially in times of bad news, they are iii. The transactions can be faster.
currency. Under the regime being more likely to panic. iv. The world regulating bodies
considered, existing crypto exchanges
Government has raised concerns can make rules to regulate that
would be given time to comply with
over transparency in crypto currency so that no proliferation
the eligibility norms. Further, the
currency advertisements. As part takes place.
crypto platforms registered with the
of the Government’s discussion, the v. FDI laws and ancillary
designated regulator would have to
Advertising Standards Council of India regulations should clarify
ensure know your customer requirement.
asked advertisers to disclose the risks whether crypto exchanges will
Stock exchanges such as NSE and the
associated with crypto advertisements be considered intermediaries and
BSE, could also be allowed to have
so that consumers don’t incorrectly ecommerce marketplaces.
separate crypto segments, much like
view these products as legal tender,
the commodity and currency windows vi. The crypto currency exchanges
get allured by exaggerated returns and
they have now. advertisements should specify
unfairly comparing crypto investments
It is claimed that there are 15 million with regulated instruments. associated risks similar to what
registered users with a total investment mutual funds do.
at Rs 638crore [2]. Concerns have been CRYPTO CURRENCY AND G 20 vii. A new agency can be formulated
rising over the increasing popularity by Government to regulate
G 20 is a group of 20 countries formed
of crypto currency as an investment. crypto currency just as the SEBI
after the Asian financial crisis of 1999
In order to protect our youth from the regulates stock exchanges.
to resolve global economic and financial
potential harm that can result from
issues. India holds the Presidency of
crypto currency, it is important that all CONCLUSION
the G20 from 1 December 2022 to 30
democratic nations work together on
November 2023. The G 20 summit will The Government is not wholly opposed
cryptocurrency. 
be held in September 2023.This forum is to digital money. It is a good thing that
very important because it brings together the Government has now included
MISLEADING COMMERCIALS
20 nations which represent 85 per cent crypto currency in the 30 per cent tax
PROMOTING CRYPTO
of global GDP and have also invited the bracket because it no longer appears to
CURRENCY.
International Monetary Fund (IMF) and be completely illegal. Additionally, the
In the light of concerns over the Financial Stability Board (FSB). The fact that trading profits will now also be
misleading commercials promoting Finance Minister of India has already subject to taxation will increase investors’
crypto currency, the Government is announced that one of the agenda in confidence. The introduction of e-rupee
examining the advertising monitor’s financial sector of G20 will be regulation by the Government only shows that it is
guidelines. To address investor concerns of crypto assets. cognizant of global changes and will take
about regulatory uncertainty surrounding the initiative in approving investments.

www.icmai.in April 2023 - The Management Accountant 55

 CRYPTO CURRENCY

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