The Confederation of Indian Industries (CII), a non-profit trade association and lobbying group, has advocated that cryptocurrencies should receive the treatment as a distinct class of securities.
According to Business Line, the trade group produced a paper titled “Cryptocurrencies, Crypto Tokens/Assets, and Regulations: The Way Forward,” in which it recommends regulating rather than abolishing the crypto market. The paper emphasised the significant technological advancements that blockchain’s fundamental technology can bring to the payment and remittance industries.
Instead of regulating the nascent crypto market under existing securities laws, the paper proposes to develop new regulations.
“A new set of legislation, tailored to the context of crypto/digital currencies and their decentralised, jurisdiction-free nature, should take place”. According to the official report, “this would mean that regulatory focus would be primarily on deals and custody, rather than issuance (unless if issuance involves an Initial Coin Offering (ICO) to the public by an issuer based in India)”.
The CII research suggested that cryptocurrencies be included in a unique provision of income tax and GST rules. That allows them to be an asset class for tax purposes. Unless a participant specifically treats them as “stock in trade”.
KYC & AML standards are vital to protect investors
To protect investors, the research recommended that centralised exchanges should comply with stringent Know Your Customer and Anti-Money Laundering standards. Additionally, to get a financial markets intermediaries licence, these exchanges must register with the Securities and Exchange Board of India (SEBI). It also suggested that exchanges must maintain minimum capital and guarantee funds. While also adhering to investor disclosure standards.
The CII research comes at an important time, as parliament is now debating a proposed cryptocurrency bill. The Indian finance minister previously stated that the government would not impose a ban on cryptocurrencies. But would instead regulate them as an asset.