By Aruna Sharma, Practitioner Development Economist and Retd Secretary, GoI
The story of Virtual Digital Assets (VDAs)commonly referred to as Crypto had a shock when banned by RBI and eventually the Supreme Court removed the ban in 2020 but since then in limbo with no regulator or directions or recognition of virtual digital assets. That did not bring down the enthusiasm of investors or the exchanges who continued to innovate and adopt more and more better practices by insisting KYC those you board their exchange, all payments being digital thus enabling better analytics for red flags for platform being used for the apprehensions of the RBI for use of money laundering or end use for non-welcome activities. With suddenly countries like US, Ethiopia trying Government to invest in virtual digital assets and our neighbour Pakistan going for same, it is important for India to have robust regulation. Singapore, United Arab Emirates is last couple of years have come up with excellent documents and India can study the same. It is attracting innovators and ring fencing the misuse.
The self-regulations adopted by exchanges and some of the exchange did set example of protecting their investors when there was cyber attack reflects the maturity of the exchanges that is emerging in India. The virtual digital assets are to offer now not just block chain safer decentralized technologies but also AI for better analytics and more and more use cases. The Finance Act, 2022, recognized the crypto for taxation coming with comprehensive systems for the VDAs with 2023 notifications. The tax is 30% and 1percent of TDS on transactions.
Legally, banks are allowed to provide the services but due to RBI reservations are apprehensive to move full fledged into the same. Standing and waiting in the wings attitude will not assist India any longer. The need to come up with a clear framework is needed to ensure better mechanisms for the exchanges and to provide opportunities to invest in innovations. Crypto is earning that invests in innovations and now with mechanisms for stable coins and valuing the innovation potential makes it a measurable asset potential
The growth of investors in virtual asset continues to be phenomenal in India, with around 15 million trade and is a leading global market. This wait and watch attitude will not allow India and will be reactive when that becomes more and more acceptable and regulated mode of financial investments across globe and traded. India must come with its regulations to ensure that norms are followed of KYC, digital transaction, analytics, mechanism for quick red flags to report to regulators for further investigations. The awakening of policy on the issue is now the need and will enable to become a technology leader for India.