India Edges Toward New Regulatory Regime For Bitcoin

The Indian government could be edging toward a concrete approach to regulation of cryptocurrencies like bitcoin, according to inside sources.

According to local media reports, government agencies are putting the finishing touches to a report that would advocate a new structure to cryptocurrency regulation, drawn from a collaboration between the central bank and financial regulators tasked with proposing regulatory solutions.

It comes at a time when governments around the world are struggling to create coherent systems of regulation that don’t stifle innovation and development on the underlying technologies.

The report has been put together by agencies including the Ministry of Revenue, the Reserve Bank of India, the Department of Economic Affairs and the Department of Financial Services, and represents a broad cross-section of opinion from India’s leading financial authorities.

It has been suggested that the report could be formally launched as early as the end of next month, although some question marks do remain.

Most notably, there have been calls for a specific government department to be established that will look into the technology, and the best forms of regulation of cryptocurrencies, as well as the blockchain technologies providing the currency’s distributed infrastructure.

An undisclosed source close to the report told local media that some issues still remain unresolved, such as where specifically the burden for enforcing regulation will come to rest.

“SEBI (Securities and Exchange Board of India) can be asked to regulate virtual currencies as transactions are currently done through unregulated exchanges. RBI may step in if the government plans to regulate them or accept them as currency.”

While some will welcome the clarification that will come from a formal approach to regulation, others have concerns about the motivations, including fears over attempts to tax blockchain transactions.

Governments in U.S. states like Arizona and Nevada have sought to eliminate these threats by statute, effectively ruling out the possibility of any future taxes on blockchain transactions.

At the same time, there is an imperative for regulators to protect consumers from fraud, while ensuring adequate protections are in place to prevent money laundering.

It remains to be seen whether the ultimate regulatory proposals as published address these concerns, while alleviating the concerns of cryptocurrency investors.