For the first time, a top government official went on record on the state’s position regarding cryptocurrencies. Economic Affairs Secretary Subhash Chandra Garg, in a post-budget session with CNBC TV18, explained that the cryptocurrencies are crypto assets and not legal tender.
Garg, apart from being the Economic Affairs Secretary, is also a member of a second government committee on the regulation of cryptocurrency. The first committee’s report has already been submitted to the government. However, its findings were not made public. In the interview, he made three important clarifications on cryptocurrency in India:
- Cryptocurrency is not legal tender in India and hence cannot be viewed as a ‘currency.’
- It should instead be viewed as an asset – “crypto asset”.
- Regulation should be set up for those who wish to continue to trade in it as an asset.
- Measures should be taken preventing its use for illegal purposes
One implication of the secretary’s remarks seems to be that trading and holding bitcoin is not in itself an illegal activity. The usage of this money or asset for an illegal activity is prohibited. Failure to pay tax on the gains from the same is also likely to contravene the Income Tax Act.
The Secretary’s clarification will come as a relief for the embattled crypto coin industry which has been facing problems in three critical areas:
- Suspension or closure of bank accounts operated by exchanges.
- Income Tax surveys
- Refusal by the Registrar of Companies (RoC) to register fresh exchanges
Garg also mentioned the end of the current financial year as the expected deadline for his committee’s report on cryptocurrency. In the meantime, the price of Bitcoin has plummeted from a high of $20,000 in December to $9,300 at the time of writing.