Forbes India 15th Anniversary Special

Nirmala Sitharaman advocates for worldwide understanding in crypto regulation

Implementing regulation solely within one country without a global consensus on a borderless technology won't be effective

Shashank Bhardwaj
Published: May 21, 2024 04:01:23 PM IST
Updated: May 21, 2024 10:35:08 AM IST

Nirmala Sitharaman advocates for worldwide understanding in crypto regulationFM Sitharaman highlighted the ongoing discussions within the finance ministry and among various regulators since 2020 Image: Hardik Chhabra/ The India Today Group via Getty Images

In a recent interview with businessline, India’s Finance Minister Nirmala Sitharaman shared her perspectives on the future of cryptocurrency regulation in India. She emphasised the need for a global consensus and collaboration to manage this borderless technology effectively.

Recognising the growing importance of crypto assets, the Finance Act 2022 introduced tax regulations for these assets in India. Under the Income Tax Act of 1961, they are classified as "virtual digital assets" (VDAs). According to Section 115BBH, income from the transfer of VDAs is taxed at a flat rate of 30 percent. Taxable events include converting digital assets to fiat currency, trading between different types of VDAs, and using them to purchase goods and services.

Starting July 1, 2022, a 1 percent Tax Deducted at Source (TDS) is also applied to Virtual Digital Assets (VDAs) transfers. This TDS applies to transactions exceeding Rs10,000 and Rs50,000 for specified persons.

Crypto exchanges handle TDS deductions on sell transactions, while buyers are responsible for peer-to-peer deals. Adhering to TDS obligations ensures compliance and avoids potential financial or legal issues.

FM Sitharaman highlighted the ongoing discussions within the finance ministry and among various regulators since 2020, even before India assumed the G20 Presidency. The Reserve Bank of India (RBI) has consistently expressed concerns over the stability of cryptocurrencies, aligning with the government's cautious stance. The Securities and Exchange Board of India (SEBI) has also contributed to the discourse, suggesting that multiple regulators should oversee the sector.

During India's G20 Presidency, significant efforts were made to foster a global understanding of cryptocurrency regulation. The International Monetary Fund (IMF) and the Financial Stability Board (FSB) were brought into the conversation, and well-researched papers supported extensive discussions.

Sitharaman reiterated that a regulation confined to a single country would be insufficient for a technology that inherently transcends borders. She firmly believes effective regulation can only be achieved through a globally coordinated effort.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist.
Twitter: @bhardwajshash