Steps to regulate, track crypto mooted

Mumbai: Curbs on peer-to-peer deals, tax on airdropped coins, capital criteria for exchanges, and a filtration mechanism to allow only a certain kind of cryptocurrencies were among the proposals mooted in the course of separate interactions over the past few weeks between lawmakers, Reserve Bank of India (RBI) and the crypto community while exploring a possible regulatory framework if cryptos are allowed to survive with restrictions.

The crypto exchanges, brokers and industry bodies this month put across their views before a parliamentary standing panel on finance and banking regulator.

“A rule to route transactions through exchanges instead of P2P transfers between private wallets is likely so that cryptos changing hands don’t escape the regulatory net,” a person familiar with the discussions told ET.

“The standing committee felt that since airdrops (of coins) are in the nature of gifts, they should be taxed,” the person said.

New coins, particularly post launch, are given away free as a marketing strategy by creators of cryptocurrencies to developers, exchanges and others. “Such airdrops can be 20 per cent or higher. It’s an important source of crypto supply. It’s free money. Persons who receive the coins can then sell them down on an exchange platform for rupees,” said an official with a crypto intermediary.

Another key source of crypto in India is arbitrageurs who cash in on the price difference by buying cryptos from overseas sellers and selling them in India. At present, overseas purchases are either through remittance of funds through banking channels or in the form of swaps of stable coins for cryptos from a foreign supplier.

“The bill is in the process of being drafted. So, the details are not known. Crypto members of industry bodies like Indiatech.org and IMAI have been responding to queries from the parliamentary committee and the RBI. Since it is perceived that there may not be an outright ban, the law and subsequent regulations have to lay down the minimum capital and other requirements not only for exchanges but even for crypto custodians, aggregators and wallet providers,” said an industry source. “There are multiple issues. For instance, will accredited investors (as defined by Sebi in terms of net worth and income) have more flexibility on crypto investments? What do you do if a wallet or intermediary is hacked or turns rogue,” the source said.

Exchanges Share Info with RBI

Exchanges have already shared data with RBI on crypto holdings under various investment brackets – number of investors holding above Rs 1,000, between Rs 1,000 and Rs 10,000 etc. This puts the number of investors between 15 million and 20 million. “This is basically to know the total number of Indians holding cryptos in exchanges domiciled in India. But this data will not capture investments, particularly by HNIs, who may be investing crores in exchanges overseas,” said another person who participated in some of the discussions.