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Cryptocurrencies, according to a former RBI deputy governor, are a taxable asset or commodity.
Former Reserve Bank of India (RBI) deputy governor has spoken out regarding the country’s financial and crypto ecosystem, stating that digital assets must be acknowledged.
Speaking at the inaugural Hodl 2021 virtual conference organized by the Blockchain and Crypto Assets Council of the Internet and Mobile Association of India on Tuesday, Rama Subramaniam Gandhi said that crypto could be used for payments for economic activities, but he sees them more as an asset class.
The regulatory position in India remains ambiguous, with MPs actively debating proposals and regulations. The government said earlier this month that it was working on a draught bill to designate cryptocurrency as commodities that might be taxed. If passed, it would prohibit them from being used as payments and instead allow them to be exchanged and invested in as assets.
In 2018, the central bank prohibited all commercial banks from letting their customers to conduct cryptocurrency-related transactions; however, the order was overturned by the Supreme Court of India in February 2020.
Gandhi, who served as the central bank’s governor from 2014 to 2017, believes cryptocurrencies should be treated as an asset or commodity and taxed accordingly. Creating a legislative framework and recognising digital assets as such would allow Indians to invest in and hold them. He said that if the assets were mined rather than acquired, they should be liable to capital gains tax.
“Cryptocurrencies should be paid for through normal payment channels. If they are not, it should be deemed mined, and capital gains tax must be levied. That is like voluntary disclosure.”
According to the former central banker, cryptocurrencies would be exploited for criminal purposes if there were no restrictions or government control. He stated that transactions might be tracked via a centralised repository to ease trade and avoid unlawful use.
Gandhi remarked that the government should be open to economic transactions including cryptocurrencies, but warned against the anonymity features that some blockchains provide, adding that society must follow any compliance regulations imposed by the state:
“A state will always want to give freedom to its citizens in terms of economic transactions. It enforces contractual obligations and taxes income and gains. So, any economic activity should be amenable to these kinds of things.”