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Govt looking to gauge Indian companies' exposure to cryptocurrencies

The industry is still unclear about the legal status of cryptocurrencies but believes this is a positive step for the digital assets space. The industry players believe this will increase institutional participations in the crypto space in the country

Avneet Kaur | March 25, 2021 | Updated 21:19 IST
Govt looking to gauge Indian companies' exposure to cryptocurrencies
The amended schedule will come into force on April 1, 2021, but needs to be approved by Parliament

The latest notification issued by Ministry of Corporate Affairs makes it mandatory for the companies to disclose crypto trading and investments during the financial year. The central government has amended the Schedule III of the Companies Act which guides the preparation of financial statements of every company in India.

"Where the Company has traded or invested in Crypto currency or Virtual Currency during the financial year, the following shall be disclosed:- (a) profit or loss on transactions involving crypto currency or virtual currency (b) amount of currency held as at the reporting date, (c) deposits or advances from any person for the purpose of trading or investing in crypto currency/virtual currency," reads the notification.

The amended schedule will come into force on April 1, 2021, but needs to be approved by Parliament.

The industry is still unclear about the legal status of cryptocurrencies but believes this is a positive step for the digital assets space. The industry players believe this will increase institutional participations in the crypto space in the country.

"This a major step towards regulating the crypto assets in India and will bring in lot of transparency in reporting/filing of crypto investments. The move will boost institutional adoption of crypto assets in India and will take Indian crypto industry to the next phase of growth," says Shivam Thakral, CEO, BuyUcoin.

However, the legal experts fail to predict what has triggered this change. "Government is looking to gather data on Indian companies' extent of exposure to crypto assets," says Sanjay Khan, Partner, Khaitan & Co.

Some legal experts fear that the exercise of data collection could be to begin investigations around the participating institutions. According to Avimukt Dar, Partner at IndusLaw, this reporting exercise, which will need sign off by external auditors as well, can be a prelude for possible investigations and penalties as there is no clarity yet from the government as to what 'calibrated regulation' means.

Despite the perplexity, Sanjay Khan is hopeful that the Government might wish to evaluate this data and take a decision  for overall regulation or taxation of crypto transactions and businesses.

He says, "If implemented correctly and with care, this should pave way for an informed Governmental decision and effective regulation / taxation of crypto transactions and businesses in India, one of the world's largest and fastest growing crypto markets."

According to Thakral of BuyUcoin, it is important to note that Indians have already invested around $1.5 billion into crypto assets.

The industry players are eagerly waiting for guidance from the Finance Ministry and the Reserve Bank of India (RBI) to clear the air for them. Nobody could clearly define the private virtual currencies till date.

Also Read: Nandan Nilekani backs cryptocurrencies amid ban murmurs

Also Read: Centre may block IP addresses of cryptocurrency exchanges

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