India is not planning to regulate the cryptocurrency sector anytime soon, according to Pankaj Chaudhary, Minister of State for Finance.

Chaudhary’s comments were in response to questions from GM Harish Balayogi, a member of parliament. Balayogi sought clarity on the government’s stance on cryptocurrencies and inquired about any research or initiatives undertaken to understand the sector, as well as forthcoming legislations.

In his written reply on Aug. 5, Chaudhary stated there is “no proposal” to regulate the “sales and purchase” of cryptocurrencies, referred to as virtual digital assets in the Indian constitution.

Oversight Mechanism

Regarding an oversight mechanism, Chaudhary mentioned that the Financial Intelligence Unit (FIU) is authorized to designate Virtual Digital Asset Service Providers as reporting entities. These entities must adhere to the stipulations of the Prevention of Money Laundering Act (PMLA) of 2002, allowing the regulator to monitor illicit activities such as money laundering and terrorism financing.

Despite the absence of a solid regulatory framework, law enforcement agencies, including regulators like the Reserve Bank of India, are equipped to investigate and act against illegal activities under existing laws. For instance, the Directorate General of GST Intelligence recently sent a show-cause letter to Binance, ordering the exchange to pay $86 million in due taxes.

Government Research

Chaudhary also indicated that the government doesn’t collect any data on cryptocurrencies as it is an “unregulated” sector. He referred to the G20 Roadmap on Crypto Assets adopted by G20 member nations under India’s presidency last year. This roadmap emerged from a joint IMF-FSB synthesis paper, which presented several recommendations on how member nations should approach crypto regulations.

The G20 member nations, including India, are currently evaluating the “country-specific” risks and benefits associated with cryptocurrencies.

Subsequently, the next step would be to coordinate with global standard-setting bodies before considering any measures.

Ajay Seth, Secretary of Economic Affairs, mentioned last month that an inter-ministerial group comprising multiple regulators is working on a “wider policy for cryptocurrencies,” following IMF-FSB guidelines. The paper is expected to be released before September 2024.

Current Regulations

India currently has a licensing regime in place, implemented by the FIU after blocking several foreign crypto exchanges. This regime requires locals to report their crypto holdings and pay a 30% tax on capital gains, as per a tax law passed in 2022.

The nation is also actively pursuing its central bank’s digital currency, the e-rupee, which achieved 1 million retail transactions in late June. Initially limited to local banks, the pilot phase now allows applications from payment firms. Notable names like AmazonPay and GooglePay have shown interest in enabling e-rupee transactions on their platforms.

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