What Is Crypto Bill & How It Works – Forbes Advisor INDIA #IndiaFinance

A cryptocurrency is a virtual asset based on a network scattered across many computers. It is a decentralized form that allows cryptocurrency to exist outside the central government’s or authorities’ control.

The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was introduced in the Lok Sabha. The bill seeks to create a favorable framework for creating a digital currency that will be issued by the Reserve Bank of India (RBI).

Cryptocurrency Bill: Here’s What The Ministry Of Finance Said On Crypto Bill In Parliament

The Cryptocurrency Bill was scheduled for the 2021 Winter Session of the Parliament, but it didn’t happen. However, the Ministry of Finance was questioned about the Bill in the Lok Sabha session. 

The questions raised: What is the current status of the Cryptocurrency Bill? When will it be tabled and open for input?  Which ministry/department will regulate virtual assets like cryptocurrencies, non-fungible tokens (NFTs), decentralized applications, real estate tokens, and other assets? 

On behalf of the Ministry of Finance, Shri Pankaj Chaudhary, Minister of State Finance, answered the questions by saying, “Crypto assets are, by definition, borderless and require international collaboration to prevent regulatory arbitrage. Therefore, any legislation on the subject can be effective only with significant international collaboration on evaluating the risks and benefits and evolution of common taxonomy and standards.” He later added that the policy-related ecosystem and crypto assets are with the Ministry of Finance.

The government of India was scheduled to introduce new cryptocurrency regulations during the Winter Session of Parliament. This was the second time the cryptocurrency bill was listed, but it was delayed. The first time it happened was during the Budget Session of Parliament in 2021.

Cryptocurrency Bill: All Top Countries Where Crypto Is Legal, Illegal Or Restricted

Cryptocurrency has been a debatable topic since its introduction. Some countries believe in its decentralized power, and some don’t. The legal status of cryptocurrency is different from country to country.

Cryptocurrency is used anonymously to conduct transactions globally between account holders. This raises currency concerns for the governments of different countries. Some officials or legislators, because of the lack of control and illicit ties, may not support the use of cryptocurrency. 

Under the country’s anti-money laundering and counter-financing of terrorism laws (AML/CFT), some countries may have introduced regulations to lower the usage for these purposes.

Let us see the countries in which cryptocurrency is legal, illegal or restricted. 

U.S.

The U.S. has a dual governance system. Different states can have different laws regarding cryptocurrency. For example, New York has been in favor of cryptocurrency since 2016, when it launched a licensing framework for crypto and business exchanges called “BitLicense.” 

Many states in the U.S. have yet to take a stance on cryptocurrencies. The different states hold varied regulations on cryptocurrency, but to sum up, the U.S. has a positive approach to the trading community and is a country where cryptocurrency is legal.

The European Union

The European Union has 27 member countries, and legislation at the Union Level is quite complicated. So far, the majority of countries in the European Union have opted for a soft regulatory framework for cryptocurrency. 

In 2020, the European Commission finalized a plan for legislation to regulate virtual assets, which many companies or agencies have endorsed within the Union. The legislation is planned to keep the financial regulatory frameworks from fragmenting. The commission also ensures that people have access to and can securely use cryptocurrency.

The United Kingdom

The U.K. has allowed the use of cryptocurrency since its introduction, using existing policies and growing experiences to help it develop a framework for crypto asset regulation.

They updated the Financial Services and Markets Act in 2023 to guide regulating digital assets. The Act allowed the government to designate crypto asset activities and regulate them with reporting, operational requirements, consumer protections, and safeguards.

The government regulates the following crypto assets:

• Exchange tokens (cryptocurrencies)
• Commodity-linked tokens
• Asset-referenced tokens
• Algorithmic tokens
• Fan tokens (sports-related cryptocurrencies)
• Fiat-backed stablecoins
• Crypto-backed tokens
• Governance tokens
• Non-fungible tokens

Canada

Canada is cryptocurrency-friendly. The Canada Revenue Agency (CRA) views cryptocurrencies as income tax items. Any income or capital gain from a cryptocurrency transaction must be reported. 

The country has been more motivated than others regarding crypto regulations. It became the first country to accept a bitcoin-traded fund (ETF), with some now trading on the Toronto Stock Exchange. 

Canadians consider crypto exchanges to be money service businesses under the purview of the Proceeds of Crime and Terrorist Financing Act. As a result, the exchanges need to be registered under the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). People can report certain records, abide by compliance plans, or report suspicious transactions.

List of the Countries where cryptocurrency is banned:

• China
• Saudi Arabia
• Pakistan
• Bolivia
• Tunisia

Is Cryptocurrency In India Legal or Not?

Cryptocurrencies are not regulated by any central authority in India as a payment medium. There are no rules, regulations, or guidelines for settling disputes while dealing with cryptocurrency. So, trading in cryptocurrency is done at investors’ risk.

The Finance Minister of India, Nirmala Sitharaman, proposed taxing digital assets, increasing the debate on the legality of cryptocurrencies in the country. While many have embraced the decision to tax virtual currency as the first step to recognizing it, the government has yet to pass any official clarification on whether currencies like Bitcoin are legal or not in India. 

One can conclude that cryptocurrency is illegal based on the various key statements made by the Reserve Bank of India Governor and various government spokespersons, including the country’s finance minister. Still, there is no specific ban on it in India. It is unregulated, but according to the recent Union Budget 2022, the government of India announced a 30% tax on gains from cryptocurrencies and a 1% tax deducted at source.

Cryptocurrency Tax In India: What We Know So Far

Cryptocurrency tax is one of the most confusing aspects in India. Initially, the Income Tax Act or Goods and Services Tax (GST) did not define cryptocurrencies in India. In the recent Union Budget 2022 outcome, the Finance Minister presented a tax regime for virtual or digital assets, including cryptocurrencies. 

• Cryptocurrency investors must report the calculated profits and losses as a part of their income.
• A 30% tax will be charged on the earnings from the transfer of digital assets, including cryptocurrencies, NFTs, etc.
• Earnings from the transfer of virtual assets will be reported only at the cost of acquisition; no deduction will be permitted.
• If the buyer’s payment exceeds the threshold limit, a 1% tax deduction is deducted at source (TDS).
• If cryptocurrency is received as a gift or transferred, it is taxed on the giftee’s end. 
• If you face any loss from the virtual asset investment, it cannot be balanced against other income.

Cryptocurrency Bill: The Road Ahead

The Cryptocurrency Bill 2021 is a legislative initiative introduced in the Lok Sabha by the government to regulate the thriving cryptocurrency market in India. The industry has seen a rush in investment in the last few years, especially during the COVID period, domestically and internationally. 

In India, crypto trading platforms like CoinDCX, Zebpay, Mudrex, etc., are witnessing a giant volume leap. An unregulated crypto market is unfavorable and risky even when the government wants to protect young entrepreneurs and investors. 

By introducing the Cryptocurrency Bill in 2021, the government officially took a step toward regulating cryptocurrency. The bill seeks a favorable structure for creating the official digital currency issued by the Reserve Bank Of India (RBI). It also prohibits all other private cryptocurrencies but, with certain exceptions, to boost cryptocurrency’s underlying technology. 

In the Union Budget of 2022, the government already imposed a 30% tax and 1% TDS on gains from virtual digital assets or cryptocurrencies. 

Read more: Union Budget 2024 Highlights

Bottom Line

The Cryptocurrency Bill 2021 is still in process and might even take a while to be open for consultation. The government of India had already taken a step when it introduced taxation on virtual assets in the Union Budget 2022. However, the introduction of the Cryptocurrency Bill is an important milestone.

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