Former RBI Deputy Governor Advocates for Cryptocurrency Acceptance in India

The Case for Crypto Acceptance

At the recent Hodl 2021 virtual conference, Rama Subramaniam Gandhi, ex-deputy governor of the Reserve Bank of India (RBI), made waves by proclaiming that India must embrace cryptocurrency. While he acknowledged the potential of these digital assets for facilitating payments, he firmly views them primarily as a new asset class.

Current Regulatory Landscape

India’s regulatory framework on cryptocurrencies is as clear as mud. Bills are still being shuffled around in legislative circles like a deck of cards. Gandhi pointed out that the government recently announced a draft bill to categorize cryptocurrencies as commodities for tax purposes. However, this bill could prevent cryptocurrencies from being used for payments, restricting them instead to trading and investment activities.

The Past and Future of Crypto Regulations

In a rollercoaster like fashion, the Central Bank’s previous ban on commercial banks engaging in cryptocurrency transactions was overturned by the Supreme Court in 2020. This decision opened the floodgates for potential crypto engagement. But still, the need for clear regulations to govern the use and taxation of cryptocurrencies remains. Gandhi suggests that recognizing crypto as an asset and taxing it accordingly would enable Indians to confidently invest in and hold these digital currencies.

Taxation and Compliance: The Necessary Framework

According to Gandhi, any cryptocurrency mined should be subjected to capital gains tax, while purchases should flow through standard payment channels. He senses a sneaky phenomenon wherein, if not regulated, cryptocurrencies could become the playground for unscrupulous activities. His proposal? A central repository to track transactions and thwart illicit practices.

Government’s Role: Striking a Balance

It’s a fine line the government walks – wanting to empower citizens economically while enforcing compliance. Gandhi underscores the need for the government to keep an open mindset about crypto transactions, all while remaining vigilant about the anonymity aspects of some blockchain technologies. As he aptly put it, “A state will always want to give freedom to its citizens in terms of economic transactions,” but it must also ensure that these activities adhere to established compliance rules.