EXCLUSIVE: Centre finalising stance on cryptocurrencies as FATF discussions loom

The central government is finalizing its views on cryptocurrencies in order to submit its response to the Financial Action Task Force (FATF) Mutual evaluation by early 2023. “The revenue department has already sent their views and the Department of Economic Affairs has now been tasked to prepare a detailed response on India’s stance on the legality of cryptocurrency,” said a government official.

The FATF Mutual evaluation report is an assessment of country’s measures to combat money laundering and the financing of terrorism and proliferation of weapons of mass destruction. “One of the questions that we have to respond is on the legality of cryptocurrencies, since we have already started to tax them. We will finalize our responses by February-March 2023. We have to respond to the FATF by May”, the source added.

The Department of Economic Affairs had earlier said that a consultation paper on virtual digital assets (VDA) is under preparation and a collaborative effort will be taken in order to decide the legality of VDA’s.

The latest meeting of the Financial Stability and Development council (FSDC) chaired by Union Finance Minister Nirmala Sitharaman also briefly discussed the need for a clear consensus on the legality of cryptocurrencies. The FM had also discussed the matter with Kristalina Georgieva, Managing Director, International Monetary Fund.

In the 2022-23 Union Budget, the government had defined cryptocurrencies as virtual digital assets and also imposed a 30 per cent tax on gains made from such transactions. It also proposed a 1 per cent tax deducted at source on all such transactions effectively from July 1, 2022. As per sources, the government is also in the final stages or considering a “reverse-charge” on Indians investing in virtual digital assets on overseas cryptocurrency platforms.