India’s cryptocurrency ecosystem is eagerly hoping for a hint of regulation from the government come Feb. 1, 2022.India’s Finance Minister Nirmala Sit
India’s cryptocurrency ecosystem is eagerly hoping for a hint of regulation from the government come Feb. 1, 2022.
India’s Finance Minister Nirmala Sitharaman will present the nation’s budget at the beginning of the month, considered the most important financial day of the year for the world’s largest democracy.
The speech sets the financial tone for the year, indicates how government resources will be allocated, how taxes will be regulated, which welfare policies will be introduced to reduce wealth inequality, which sector will be aided to boost growth and most importantly, it reflects the government’s balance sheet and therefore tells the state of the economy.
It is possible that cryptocurrency policy gets a mention or more. It is equally possible that the government avoids revealing any new policy or even any mention.
“Cryptocurrencies don’t give votes,” said one policy expert, who requested anonymity because they work closely with the national government. The individual suggested the speech would be populist in nature, geared towards making goods and services cheaper to appease voters ahead of this year’s elections.
“The budget speech is roughly two hours. There are a lot of things to be said. Five states are going to elections. This might not be a priority,” the policy expert said.
Voting in the five Indian states starts nine days after the budget speech. This includes Uttar Pradesh, the most-populated state and therefore the most important for the national government.
In the highly unlikely scenario Sitharaman does reveal fresh crypto policy, the proposed rules would need to pass through parliament as legislation and become law. Therefore, it is still unlikely the crypto-sphere will see any immediate regulation implemented.
What have the last budgets said
India’s finance minister has mentioned crypto and blockchain in the past on multiple occasions.
On No. 30, she told Parliament that “a new [cryptocurrencies] bill is in the works,” warning that “the risk of cryptocurrency and it going in the wrong hands is being monitored.”
She did not know how much tax had been collected on cryptocurrency transactions at the time.
However, mentions of cryptocurrencies in the budget speech have declined.
The budget speech has gone from saying “the government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities or as part of the payment system” and saying “the government will explore use of block chain technology proactively for ushering in digital economy” in 2018 to no mention in 2019, 2020 or 2021.
“You can never guess what the government will say in the budget speech,” said Subhash Garg, former secretary in the Finance Ministry’s Department of Economic Affairs, and the man at the helm of the government’s first report to propose actions concerning cryptocurrencies.
That report had recommended a ban and suggested creation of a digital rupee. Since his retirement, Garg’s stance has changed in favor of regulating crypto.
“It is likely to get a mention. But the government may avoid it altogether too. Why enter into a controversy unless there is clarity on how to deal with cryptocurrencies. So far the government has not made clear how it plans to deal with cryptocurrencies,” Garg said.
A mention of cryptocurrency could be painted by interested parties as legitimizing the unregulated space, according to at least two policy experts who have worked closely with the government.
Spokespersons of exchanges have been going on television channels and speaking to the media about what their wishlist is, even if the possibility of any mention is unclear.
Edul Patel, the CEO of Mudrex, a crypto asset management platform, said he expects some sort of crypto mention during the speech.
“We expect a mention that will be directional in nature not instructional. We don’t expect any reasonably large changes. Purely because the government is taking its time to figure out what’s happening, which is a great thing, avoiding knee jerk reactions,” Patel said.
Sumit Gupta, co-founder and CEO at CoinDCX, one of the largest exchanges in India, believed circumstances have changed in the last year. 2021 was a great year for the sector, and therefore a mention of cryptocurrencies is possible.
“There has been a lot of new activity, trading, investors and the government has also taken part in discussions. It is now too big to be ignored,” Gupta said .
What exchanges want
In the event that India’s finance minister does address cryptocurrencies in the budget speech, exchanges appear to have some universal demands.
Categorizing cryptocurrencies is the first. Most crypto-related companies want it to be classified as assets and not currencies. This seems likely, since the legislation’s name has replaced the word “cryptocurrency” with “cryptoasset.”
“While the legal implementation still seems a while away,…
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