India intends to strengthen the regulation of cryptocurrencies to warn the investors from holding them, as the government might not follow the earlier plan to ban digital tokens, said two sources involved with the discussions.
Further, they said that India could allow the ones that have been pre-approved by the government to be listed and traded on exchanges and can be regarded as an intentionally cumbersome process.
“Only when a coin has been approved by the government can it be traded, else holding or trading it in may attract a penalty,” said the first source.
Reportedly, the government wishes to pass a parliamentary law on cryptocurrency in the session scheduled to take place this month.
This kind of pre-verification approach would create a hurdle for thousands of peer-to-peer currencies that expands outside the ambit of regulatory scrutiny.
Meanwhile, Prime Minister Narendra Modi made the first official public comment on Thursday stating that all democratic nations must work together to ensure cryptocurrency “does not end up in wrong hands, which can spoil your youth.”
Previously this year, the government regarded the possession, issuance, mining, trading, and transfer of crypto assets as criminal offenses.
According to the two sources, the stance changed since then, however, only slightly. The two sources consider that huge capital gains and other taxes may be levied to discourage crypto trading.
Besides, a senior government source stated that investors “will have to pay over 40% on any crypto gains so far,” adding that extra goods and services sales taxes and security transaction taxes could be charged on top of any capital gains taxes.
Besides, the sources stated that the government is looking forward to classifying crypto as an asset class instead of a currency, as demanded by the crypto exchanges.
However, the senior government official in an interview with Reuters told that the plan is to ban private-crypto assets at the end while paving the way for a new Central Bank Digital Currency (CBDC).
The Reserve Bank of India which has issued “serious concerns” about private crypto, is ready to launch its CBDC in December.
Last week, Narendra Modi headed a meeting about the impact of cryptocurrency on the financial sector of India amid concerns that unregulated crypto markets can manifest offenses like money laundering and terror financing.