The Union Cabinet could later this week discuss a legal framework for cryptocurrencies, which is likely to propose a complete ban on private digital currencies as legal tender.
The government has held extensive consultations on the legal framework for cryptocurrencies, including at a meeting last month chaired by the Prime Minister. The view in the government is that crypto cannot be permitted as a currency, but stringent regulation can be put in place to allow them to be held as assets.
The Cabinet could consider the cryptocurrency Bill this week and subsequently introduce it in Parliament, a person privy to the plans told ET.
The regulations are likely to prescribe investment ceilings for individuals in line with those on overseas remittance, as also stringent disclosures. Tax treatment on gains and profit made on such transactions would be defined in the upcoming budget, a government official said.
The Reserve Bank of India has voiced reservations, saying cryptocurrencies pose a threat to macroeconomic and financial stability as well as capital controls.
The proposed law is likely to be aligned with the Financial Action Task Force (FATF) guidance. The 2021 FATF Guidance included updates on six key definitions of virtual assets and virtual asset service providers (VASPs), risks and tools to address money laundering and terror financing risks and licensing and registration of VASPs, among others.
The revised FATF standards issued in October require countries to assess and mitigate risks associated with virtual asset financial activities and providers; licence or register providers and subject them to supervision or monitoring by competent national authorities.
Bill set for Introduction
The government has listed the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 for introduction in the Lok Sabha among the legislation lined up for the winter session. The Bill was listed in the budget session as well but could not be introduced as the government decided to rework it.