Synopsis–Nature of the assets is closer to a commodity and not a currency and hence falls within the domain of the capital markets regulator as opposed to the central bank, they argue
Mumbai: Top crypto exchanges have conveyed to the government in recent interactions that capital markets regulator Securities and Exchange Board of India (Sebi) is better suited to regulate the sector than the Reserve Bank of India, as crypto assets are closer to commodities than to currency.
They claim that crypto assets, such as Bitcoin and Ethereum, are not currencies and should not be regulated by the RBI. The exchanges have also pitched for a new regulator for cryptocurrencies. Recently, the central bank had asked banks to stop allowing consumers to trade and invest in crypto assets.
This, according to experts, could lead to a legal tussle. “If the banks stop allowing consumers to trade or invest in cryptocurrencies following an RBI directive, it could again be challenged in a court of law,” said Rashmi Deshpande, partner at corporate law firm Khaitan & Co. “It’ll make sense to have a regulatory body like Sebi govern the functions of crypto platforms.”
Whether for tax purposes or otherwise, there is no clarity as to whether crypto assets are currency, commodity, service or closer to equity.
“This will entirely depend on how the government plans to utilise the cryptocurrency and blockchain industry, but the easiest way to regulate it currently would be to classify it under Sebi as their norms do align in some ways with crypto,” said Monark Modi, founder of cryptocurrency exchange Bitex.
Many are also pushing for a hybrid or a new regulator for regulating the crypto assets. “Every industry needs a healthy regulatory environment for sustainable growth and the crypto industry being a fairly new concept needs support from RBI and Sebi both. Under Sebi and RBI, a hybrid regulatory body can be created which will be responsible for regulating crypto exchange,” said Shivam Thakral, CEO of crypto exchange BuyUcoin.
Legal experts say that since crypto assets are not “owned” or backed by a state, government or a group of countries (such as the EU), they cannot be called “currencies”. The closest they come to is gold, a category in which people can invest and trade.
Experts advising the Indian exchanges argue that cryptocurrencies are also not private assets as they don’t have an owner or issuer. The exchanges have been pushing to be recognised in one way or another. Currently, no law recognises them in any way, including tax regulations and there is no clarity on taxes applicable under income tax and GST rules.
Cryptocurrency exchanges had also reached out to the government and sought clear regulations for controlling and taxing crypto assets, even suggesting that instead of a complete ban, the government should club them under the highest tax brackets, ET had reported this on March 18.
Defining the crypto assets has also been one of the biggest challenges for governments, including India.
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