When the Minister of Finance presented the budget for the next fiscal year, many expected either a proposal banning cryptocurrency or at least proper regulation for cryptocurrency trading. But the Minister of Finance was content to impose a 30% capital gains tax and a 10% TDS on every cryptocurrency transaction.
The Finance Minister clarified in Parliament that taxing cryptocurrencies does not give them any legal status and, according to her, taxing “virtual digital transactions” is the sovereign right of the government. She may be technically correct that she can tax both legal and illegal activities, but the latter should not be allowed in the first place, and one cannot compromise by taxing these activities.
Incidentally, on February 25, while dealing with a money laundering case, the Supreme Court asked the Additional Solicitor General, “We would like you to tell us how you treat people who trade Bitcoin and of cryptocurrency. Is manipulation of cryptocurrency still illegal in India? »
Furthermore, the Minister of Finance informed that a decision on whether or not the country should ban cryptocurrencies will be taken after consultations. It’s funny because the decision on this has been pending for over four years.
In April 2018, the Reserve Bank of India imposed restrictions on crypto trading. However, cryptocurrency exchanges scored a victory after the Supreme Court endorsed their stance against the restrictions put in place by the RBI that effectively banned virtual currencies in India.
The verdict came on petitions from the Internet and Mobile Association of India and others challenging the RBI circular which stated that entities regulated by it were prohibited from ‘providing any services related to virtual currencies, including those transferring or receiving money in accounts related to the purchase or sale of virtual currencies.’
The logic behind the Supreme Court’s decision can be understood when it said: “When RBI’s consistent position is that it has not banned virtual currencies and the Indian government is unable to respond to an appeal despite several panels proposing several proposals, including two bills, which both advocated exactly opposite positions, it is not possible for us to consider that the impugned measure is proportionate.
It is clear from this that the Supreme Court allowed the trading of cryptocurrencies, as the government and the RBI did not take any concrete decision to prohibit such transactions. It is unfortunate that even after four years, the government has not made a decision and is still not engaging on cryptocurrency trading in the country.
The Minister of Finance recently stated that there is complete harmony between the Center and the RBI and that they are on the same page on cryptocurrency. RBI Deputy Governor T Rabi Sankar said recently that banning cryptocurrencies is the smartest choice for India as they are akin to Ponzi schemes and “could even be worse.” “.
As everyone knows, crypto lacks the characteristics of a currency – namely durability, portability and divisibility – and there is no sovereign guarantee for its value.
Moreover, the crypto has no underlying assets to fall back on and the Deputy Governor is right when he says that this is akin to a Ponzi scheme. If the RBI and the government are on the same page, why is there a delay in banning cryptos?
Legendary investor Charlie Munger has said the cryptocurrency should have been banned, calling it “a misunderstanding”.
India should ban cryptocurrency as soon as possible, especially to protect the interests of retail investors who are lured by eye-catching advertisements.
The writer is a retired banker
March 15, 2022