The Indian government is under pressure from the country’s central bank and the Swadeshi Jagran Manch (SJM) to completely ban cryptocurrency.
The Reserve Bank of India (RBI) said at its recent meeting of the central board of directors that cryptocurrency must be fully banned and that a partial ban will not work. The Swadeshi Jagran Manch (SJM), an affiliate of the nationalist Rashtriya Swayamsevak Sangh, also passed a resolution calling for a ban on cryptocurrency.
While the government has not made an official announcement whether it will ban or regulate crypto, legal experts reportedly said that it is too late to ban cryptocurrency.
They explained that the government’s cryptocurrency legislation will have to be balanced. This will not only ensure that investors will not be hurt but also prevent crypto from growing uncontrollably, which could threaten India’s foreign exchange reserves and disrupt its economy.
L. Badri Narayanan, executive partner at Lakshmikumaran & Sridharan Attorneys, was quoted as saying:
The government is viewing cryptocurrencies as investment instruments and plans to regulate them. Under income tax rules, cryptocurrencies are likely to be treated as assets and attract capital gains. GST and TDS are other areas where the position of law is not clear.
The legal experts reportedly added that comprehensive regulation is needed. They further noted that India’s cryptocurrency approach should not be compared to developed countries due to differences in foreign exchange regulations.
Narayanan also explained that it would be challenging for regulators to stop Indians from sending crypto payments overseas, elaborating:
You cannot take money out of India without permission. We are a foreign exchange-regulated market and that means we cannot take certain decisions like developed countries that have a free market.
Under FEMA (Foreign Exchange Management Act), the cross-border movement of goods and services is classified as import/export, the publication conveyed.
Recently, International Monetary Fund (IMF) chief economist Gita Gopinath said banning cryptocurrencies would pose practical challenges, given their decentralized nature. She emphasized the need for a global policy on cryptocurrency.
The Indian cryptocurrency bill that was listed for consideration in the winter session of parliament was not taken up, and the government is reportedly reworking the bill.