January 20, 2022
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Treat crypto as special class of securities, CII urges government
The CII suggested that the government should treat cryptocurrencies as a special class of securities with its own regulations.
It said that existing securities regulations should not be applied to crypto and that “a new set of regulations would be appropriate, keeping in mind their jurisdiction-less and decentralised character.”
The CII’s suggestion comes as the government is set to introduce the cryptocurrency bill in the ongoing winter session of Parliament. The bill seeks to prohibit all “private” cryptocurrencies in India and create a framework for India’s official digital currency to be issued by the Reserve Bank of India.
Since news of the bill’s imminent introduction in Parliament broke a few weeks ago, various crypto players and industry bodies have been lobbying the government. Two weeks ago the Blockchain and Crypto Assets Council (BACC), a part of the Internet and Mobile Association of India (IAMAI), said a blanket ban on cryptocurrencies would encourage non-state players, leading to more unlawful use of crypto. More on this below.
What else did CII say? It said the government should consider setting up a standing advisory council for crypto. Comprising representatives of regulators, policymakers, and other stakeholders, the council would advise the government on the challenges around cryptocurrencies and their regulation.
It suggested that the government establish centralised exchanges and centralised custody providers under the Sebi. These exchanges would have to comply with KYC and anti-money laundering laws that apply to intermediaries in the financial markets.
CII also recommended tax reporting requirements for all crypto investors through specific disclosures in income tax returns.
Crypto lobbying: In a submission before the Supreme Court last month, the IAMAI listed several negative outcomes of a blanket ban on crypto, such as zero accountability and traceability of the origin and end-use, besides a complete evasion of taxes. A ban would also adversely affect retail investors, it said.
Like CII, the IAMAI also pushed for cryptocurrencies to be classed as assets and banned from being used as currencies. “The council has always argued in favour of prohibiting the usage of private cryptocurrencies as a currency in India… the council has advocated their use only as an asset,” BACC wrote.