The Confederation of Indian Industries (CII), a non-government trade association and advocacy group, has proposed to treat cryptocurrencies as securities of a special class.
The trade association released a report titled “Cryptocurrencies, Crypto Tokens/Assets & Regulations: The Way Forward” where it advocates for regulating —not outlawing — the crypto market, reported Business Line. The report highlighted substantial technological innovation that the core technology of blockchain can bring in the payment and remittance sector.
The report proposes to formulate new regulations around the nascent crypto market instead of regulating them under existing securities law.
“A new set of regulations appropriate to the context of crypto/digital currencies and their jurisdiction-less, decentralized character, should be evolved and applied. This would mean regulatory focus principally on dealings and custody, rather than on issuance (except where issuance entails an Initial Coin Offering (ICO) to the public by an issuer established in India),” said the official report.
The CII report recommended bringing cryptocurrencies under the special provision of income tax and GST laws, under which it can be treated as an asset class for tax purposes unless specifically treated as “stock in trade“ by a participant.
The report recommended imposing strict Know Your Customer and Anti-Money Laundering requirements for centralized exchanges to ensure investor protection. Further, these exchanges must register with the Securities and Exchange Board of India (SEBI) to obtain a financial markets intermediaries license. It also recommended setting a minimum capital and guarantee fund requirement for exchanges while complying with investor disclosure requirements.
The CII report comes at a crucial juncture as a draft of a cryptocurrency bill is currently up for discussion in parliament. The Indian finance minister had earlier assured that the government would not take a ban approach and rather regulate cryptocurrencies as an asset.