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Source: The post On Benefits of Cryptocurrency for India has been created based on the article “Bitcoin gains acceptance India needs clear rules on cryptos” published in “Live Mint” on 18th December 2023.
Syllabus Topic: GS Paper 3, Indian Economy, Money and banking
News: The status of Bitcoin and other cryptocurrencies is evolving, as they edge closer to mainstream acceptance in the global financial system. Therefore, there is a need for regulatory clarity in India regarding cryptocurrencies.
Cryptocurrencies are gradually becoming a “mainstream alternative financial asset”.
What is Crypto-Asset Reporting Framework?
Released by: Organization for Economic Co-operation and Development (OECD)
Objectives: To enhance transparency in the global financial system, combat tax evasion, and ensure tax compliance related to crypto assets.
It was designed to establish a standardized framework for the reporting and exchange of information related to financial transactions involving cryptocurrencies and other digital assets.
What are the developments concerning cryptocurrencies?
1) El Salvador launched a Bitcoin “volcano” bond.
2) An approval of a Bitcoin ETF by BlackRock in the United States is pending.
3) Nasdaq has listed several companies focused on crypto mining.
What are the significances of cryptocurrencies?
Digital gold: Due to their performance, Investors have stated seeing cryptos as “digital gold” which provides a hedge against inflation.
Remittances: Cross-currency remittances done via cryptos are substantially cheap compared to conventional bank transfers. Remittances to India are roughly $100 billion per annum.
Loss for freelancers: Indian freelancers working in crypto and blockchain start-ups are often offered payments in cryptos.
Loss of new business opportunities: The Indian citizens interested in Crypto mining, thriving gaming and non-fungible token (NFT) ecosystems, are discouraged due to uncertainty in the Crypto regulations space.
What is its present status in India?
First, under the Crypto-Asset Reporting Framework, Overseas transactions in cryptocurrencies by Indian citizens will be reported to Indian tax authorities. However, it is not clear, how Indian citizens can use cryptocurrencies.
Second, Regulations have resulted in imposition of a very high tax on trading in these assets.
Third, there is no clarity on whether cryptocurrencies can be used for cross-currency remittances, or as alternatives to the rupee in buying goods and services.
Fourth, therefore, India to establish clear rules and guidelines on the use and taxation of cryptocurrencies to keep pace with global trends and safeguard interests of developers, entrepreneurs, and investors.
