The Indian government maintains a cautious stance on cryptocurrency despite Bitcoin’s surging value. At the India Today Conclave held recently, Union Finance Minister Nirmala Sitharaman highlighted the dangers associated with unregulated crypto. She emphasised the risk of illicit activities such as terror funding and drug financing due to inconsistent regulation across nations.

In this piece, we delve into the Finance Minister’s remarks regarding cryptocurrency’s classification as an emerging asset class, examine the sentiments of crypto players, and address India’s ongoing stringent stance towards cryptocurrencies.

In response to a query on the resilience of Bitcoin, Sitharaman said that the government’s consistent stance has been that assets formed under the umbrella of cryptocurrency can serve various purposes, such as trading, speculation, profit generation, and more.

“We haven’t regulated them, and then we haven’t regulated them even now. But they cannot be currencies is what I’ve always held, and that’s the government of India position. Currencies are to be issued with the fear of the government or the central bank, so that is a different story. So if they’re coming back, this resurgence, that is the asset which is being created for speculation or for trading or for whatever purpose, and it is still unregulated in India. And that is why we thought it fit to raise it in the G20 forum because as it is so technology driven and it will have a bearing on cross border payments and so on if one country regulates and others don’t, it will be an easy way of moving money around tripping or funding drugs or even terrorism and so on. So we wanted to create a kind of a framework by taking it to the level of G20. It has been very well received and I’m sure there will be some framework emerging,” FM said.

Despite approaching cryptocurrencies with caution, it’s important to consider the perspectives of crypto players.

“India’s response to crypto is very nuanced and thoughtful. As the Finance Minister recently reiterated, the existing rules consider crypto as a virtual digital asset and not a currency. India is right on this approach. In India, users trade on VDAs for capital gains. He or she does KYC, pays advanced taxes where applicable, and pays taxes on profits made on VDA. This is to say, an Indian user treats crypto as any other investment instrument in his or her portfolio. CoinSwitch is in agreement with this: We view crypto as an asset class for wealth creation. That said, we would like to see taxation on crypto to come down so it is at par with other asset classes. There is no demand for the currency use cases of crypto in India. Currency is a sovereign prerogative, and India’s payment infrastructure is sufficient and even ahead of much of the world. The Government’s approach to crypto should be seen in this light: It has clarified the processes and guidelines a user and a platform have to follow on use of crypto as a VDA, while protecting its sovereign interest.”