According to the CII, crypto or digital tokens should be recognized as securities of a specific class to which current securities laws will not apply. Therefore, a new set of regulations suited to the circumstances should be developed and applied. According to the report, it would mean that regulatory attention would be focused on transactions and custodians rather than issuance (unless if issuance involves a public Initial Coin Offering (ICO) by an issuer based in India).
It says that centralized exchanges and custody providers based in India ought to be required to register with SEBI and adhere to the same KYC and AML compliance requirements. As a stock market financial intermediary, they are compiled to do so. They must be held criminally liable for the safe custody of virtual currencies tokens held by attendees in their e-wallets.
The Cryptocurrency and Official Digital Currency Regulation Bill, 2021, has been placed in Part II of the Lok Sabha Bulletin for discussion during the present winter quarter. According to the Bulletin, the bill aims to build a framework to facilitate the creation of an authorized virtual currency to be released by the Reserve Bank of India (RBI). It also intends to outlaw all private cryptocurrencies in India, with few exceptions to encourage the fundamental technology and its applications.
In addition, the chamber proposed that crypto/digital tokens be treated as assets of a distinct class under income tax and GST laws. It stated that crypto/digital tokens could be deemed capital assets’ for income tax purposes until a participating member treats them as stock in trade.
It is also suggested that participants who invest or deal in cryptocurrency exchanges (whether through a centralized crypto exchange or elsewhere) be required to record their activities to the IRS via certain disclosures in their tax filings. Finally, the chamber stated that regulators and tax agencies must begin establishing the capability to use big data and analytics to monitor the data traces in the blockchain network on which digital/cryptocurrencies/assets run.
The legal power to grant a crypto/digital coin of Indian Rupee must be reserved to Central Bank Digital Currency (CBDC) issuance by the RBI to protect the Indian public interest. However, suppose an offering by a non-RBI institution is deemed permissible. In that case, it must be subject to regular RBI approval, which must depend on adherence to rigorous prudential criteria of holding assets primarily in credit-risk free treasury bills/short duration sovereign securities.