India at Crypto Crossroads

 It’s been a packed first week of December, following the frenetic news cycle we’ve all been trying to catch up on this year.

We’ve been following all the crypto developments since last week when a Lok Sabha bulletin gave way to speculation on what India’s Cryptocurrency Bill — to be tabled in the ongoing session of Parliament — will actually contain. Read what Apoorva, our crypto reporter, wrote in the previous edition of ETtech Unwrapped.

There’s a lot to unpack here, so we’ll let our reportage this week do the talking.

India looks to add crypto to Tax Law: Indians who trade or invest in cryptocurrencies on Indian platforms could come under the taxman's lens, as might those who hold such coin outside the country.

• The government is looking to amend current income tax and disclosure norms in the upcoming budget to include terms such as cryptocurrency.
• The government wants to capture cryptocurrency income and investments within and outside India, said people aware of the development.
• The government is considering amending Section 26A of the Income Tax Act and the Annual Information Regulation (AIR), often called a 'tax passbook'.

"There is a recommendation to add the words cryptocurrency, crypto assets or digital currency in some parts of the Income Tax Act," one of the persons said. "This would mean that those filing tax returns will have to specifically disclose their income from cryptocurrency investment or trading."

Talks, and more talks: The central government, the country's banking regulator and members of India's crypto community have discussed several proposals during separate interactions to explore a possible regulatory framework if private cryptocurrencies are allowed to survive in India—with restrictions.

The proposals include:

• Curbs on peer-to-peer transactions
• Tax on airdropped crypto coins
• Capital criteria for exchanges
• A filtration mechanism for crypto

The industry wants the government to consider a separate crypto regulator, sources say.

RBI-backed CBDC likely to feature in Crypto Bill: The proposal for a central bank digital currency, backed by the country’s banking regulator, may be included in the upcoming bill to regulate cryptocurrency, a top government official told us.

• The law aims to also ensure that the RBI does not lose control of India’s monetary economics while minimising speculative betting around cryptos, the source said.

“Unregulated cryptocurrencies can destabilise the macroeconomy and create big speculative bubbles. To that extent, the RBI is right,” the person added.

No proposal to recognise Bitcoin as currency, FM says: The government has informed the Lok Sabha that there was no proposal to recognise Bitcoin as a currency.

• To a query on whether the government had any proposal to recognise Bitcoin as a currency in the country, Finance Minister Nirmala Sitharaman replied in the negative. “No, sir,” she said in a written response in the Lok Sabha.

The central government doesn’t collect data on Bitcoin transactions, she said.