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While the Indian government is still considering a ban on crypto, it is tightening existing regulation. The Indian Ministry of Corporate Affairs (MCA) has announced on Wednesday that all companies incorporated in India are obliged to disclose any holding or dealings in cryptocurrencies or virtual currencies in their financial statements filed with the Registrar of Companies (RoC), effective April 1 when the financial year 2021-2022 begins.
Companies will now have to disclose in their statutory financial filings to the RoC any profit or loss on transactions involving cryptocurrency, the amount of cryptocurrency held on the reporting date, and any deposits or advances received from anyone for the purpose of investing in cryptocurrencies or virtual currencies.
There are mixed opinions on the new regulation and what it might indicate. There are some that believe the move is an indication that the Indian government is open to regulating cryptocurrencies instead of banning them.
“This is a major step towards regulating the crypto assets in India and will bring in a lot of transparency in reporting/filing of crypto investments… We are eagerly waiting for positive regulatory guidelines from the Finance Ministry and RBI for more clarity around crypto regulation in India,” said Shivam Thakral, CEO of BuyUCoin, who also commented that Indians have already invested around $1.5 billion into crypto assets.
And there are others who say that this additional disclosure does not directly indicate an upcoming ban on the cryptocurrency but was needed after reports came in that some start-up companies were paying their employees in cryptocurrencies.
“These reports may have prompted the government to ask for disclosures, so now if companies do not disclose their dealings then they may have to face other consequences for misrepresentation in official filings,” said Neeraj Dubey, partner at law firm Singh and Associates.
Nonetheless the timing of the MCA notification is important, coming at a time when there is ambiguity in terms of legality of cryptocurrencies in India. The government has recently proposed a bill to regulate and even ban cryptocurrencies. This new bill, Cryptocurrency and Regulation of Official Digital Currency Bill 2021, aims to prohibit all private cryptocurrencies while setting the stage to roll out the legal framework for an “official digital currency”.
Previously Finance Minister Nirmala Sitharaman did say that a calibrated approach to cryptocurrencies will be taken.
Pending the government;s final word on a possible ban, the crypto industry in India is generally receiving the latest regulatory requirements in a positive manner as it adds a bit more clarity.
Sumit Gupta, co-founder and chief executive of CoinDCX, a Mumbai-based cryptocurrency exchange said:
“It is a welcome move as the amendment is a great stride towards a regulated environment which is what the industry has been eagerly anticipating. Besides ushering in transparency for the system it will enhance the confidence of investors both retail and institutional especially in the wake of ongoing speculations around the cryptocurrency bill,”
Guta further stressed on the need for regulation and taxation, suggesting this to be the way forward instead of banning cryptocurrencies.Monark Modi, founder and chief executive Officer of Bitex confirmes Gupta’s optimism and suggests the regulation might have brought a sign of relief in the country:
“In light of the recent speculation around banning, allowing cryptocurrencies to be a part of accounting practices will definitely put investors at ease as they no longer have to be worried regarding taxation.”