Subhash Chandra Garg, Secretary of India’s Department of Economic Affairs (DEA) at the Ministry of Finance, has told reporters this week that draft regulations have been put together for a framework for the use of digital currencies.
Indian authorities have been undecided about the future of cryptocurrencies, and these long-awaited regulations follow the country’s Supreme Court decision to review a petition against the Reserve Bank of India’s (RBI) ban on crypto earlier this year.
In his budget speech in February, Finance Minister Arun Jaitley announced that cryptocurrencies are not legal tender in India and promised that the government would crack down on their use. Since then, the Income Tax Department has issued notices to thousands of crypto investors accusing them of tax evasion. For its part, the RBI ordered all regulated financial institutions to stop all services to businesses and individuals dealing in cryptocurrencies.
Many companies stepped up to challenge the ruling calling it arbitrary, unfair and unconstitutional. Protests by the country’s crypto community have put pressure on the government to reverse their ruling as many believe that the central bank did not provide any reasons for the imposed restrictions.
While in previous comments, Garg said the Indian government “does not read this [cryptocurrency] as currency” and would not allow its use in the country’s payment system, it now recognizes that some people may still find value in cryptocurrencies and will introduce regulations so that crypto transactions are legal and transparent.
Garg also indicated that the new rules would introduce regulation for exchanges in India and implement legal requirements for know your customer (KYC) procedures and record keeping for transactions.
The Supreme Court is scheduled to hear petitions against restrictions imposed on cryptocurrencies by Reserve Bank of India, on July 3 and the new regulatory framework for cryptocurrencies is likely to be presented in the first half of July.