India’s crypto consultation paper is ‘fairly ready’

• A crypto consultation paper will bring India a step closer to regulating these virtual assets.
• India was expected to table a bill in the Budget Session of the Parliament, but instead announced plans to tax the industry at the time.
• At the moment, the country levies multiple taxes on earnings from cryptocurrencies.

The Indian government is close to finalising its consultation paper on cryptocurrencies, suggesting that regulations may not be too far. Speaking at a Finance Ministry event on May 30, Ajay Seth, the Economic Affairs secretary, said that the consultation paper is “fairly ready” and the ministry has consulted both domestic and institutional stakeholders, along with the World Bank and the International Monetary Fund (IMF).

“We hope that we will soon be in a position to finalize our consultation paper. Simultaneously, we are also beginning our work for some sort of a global regulation (to determine) what role India can play,” he added.

That said, a consultation paper doesn’t necessarily mean that a regulation will follow quickly. For instance, a draft bill banning and regulating cryptocurrencies in India had been leaked back in 2019, but the same never made it to lawmakers. In addition, the agenda for the January 2021 session of India’s Parliament also suggested that a bill was in the works, but that hasn’t seen the light of day either.

The good news, however, is that Seth said that “there has to be a broad framework and participation of all countries” in cryptocurrency regulation. Which is a sign that India’s government may not be considering blanket bans on cryptos anymore, something that has been reiterated by many ministers in the past, including Finance Minister Nirmala Sitharaman.

Taxing times for crypto

The 2021 Budget Session of the Indian Parliament, held in February this year, was expected to see a bill that would accept cryptocurrencies as tradable assets in the country. While that didn’t happen, Sitharaman announced plans to tax crypto incomes at the time. Currently, India levies a 30% tax on income from crypto trading, along with a 1% tax deduction at source on sellers of cryptocurrencies.

There have also been rumours that the country may levy its controversial equalisation levy on crypto exchanges operating outside the country. This tax is commonly called the ‘Google tax’ and is levied on companies that aren’t based in India, but earn revenues from users in the country. It has been opposed by Big Tech firms in the past.