Earlier in March this year, Indiaâ€™s Ministry of Finance established an interdisciplinary committee that includes a number of authorities including representatives from the central bank â€“ which has issued warnings against the use of bitcoin in the past â€“ to study the legal framework surrounding virtual currencies.
Chaired by the Special Secretary of Economic Affairs and officials from a number of other ministries, the committeeâ€™s primary tasks, as reported by CCN earlier, are specifically:
- Considering the present status of virtual currencies globally and in India.
- Examining the existing regulatory and legal structures governing virtual currencies around the world.
- Suggesting measures in dealing with concerns in consumer protection and money laundering related virtual currencies and,
- Examining other relevant matters related to virtual currencies.
The Indian government had opened itself to public comments and suggestions about the regulation and legality of virtual currencies like bitcoin in the country on a government portal this summer and 3,357Â commentsÂ have been submitted at press time. The majority of them are in support of regulating bitcoin. Though a lot of Indian politician think bitcoin is a big Ponzi scheme, many bitcoin proponents hope Indian officials will recognize bitcoin in the same way Japan did on April 1.
Provided the committee successfully decides upon conferring a legal status to Bitcoin, with suitable amendments to existing regulations, then all cryptocurrency transactions and investments will become taxable assets. In addition to taxation, there is also a possibility of the government imposing strictÂ Foreign Exchange Management Act (FEMA) regulationsÂ against overseas cryptocurrency investments. Bitcoin users will also be required to meet stringent Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
While assigning a legal status to Bitcoin is welcomed by Indiaâ€™s cryptocurrency businesses, there are few concerns about its eventual impact on the sector.Â Indian regulators have in the past gone overboard with investment and tax regulations. If the government decides to overreach in this matter, it could end up hampering the growth of cryptocurrency ecosystem in India.
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