Former Reserve Bank of India (RBI) Deputy Governor Rama Subramaniam Gandhi favors taxing cryptocurrencies based on the way they are acquired.
“Cryptocurrencies should be paid for through normal payment channels. If they are not, it should be deemed mined, and capital gains tax must be levied. That is like voluntary disclosure,” Gandhi said Tuesday while speaking at Crypto Asset Conference HODL 2021 held by the Internet and Mobile Association of India (IAMAI) and the Blockchain and Crypto Assets Council (BACC).
The Economic Times recently reported that the government could categorize cryptocurrencies as an “asset/commodity” for all purposes, including taxation. According to Gandhi, there is a general consensus among policymakers that crypto should be deemed an asset and not a currency, payment instrument or financial instrument.
Still, the regulatory picture remains unclear with the much-anticipated Cryptocurrency Bill awaiting action in Parliament. Despite the lingering uncertainty, interest in digital assets continues to soar, with India now ranking second on the list of 20 countries with the highest cryptocurrency adoption rate, as noted by Chainalysis.
Gandhi fears that without a proper regulatory framework, crypto could be used for criminal activity.
“So that is where the real difficulty comes in vis-à-vis a crypto asset,” Gandhi said at the online event. “There has been quite a bit of an anecdotal evidence that crypto assets have been utilized for increasingly, or in large scale, for illegal activities like ransom attacks, et cetera.”
The former central banker stressed the need to keep a tab on crypto transactions through a central repository and added that the freedom to trade in digital assets cannot be granted at the expense of the laws of the land.
“The very idea of crypto was that it should be anonymous, independent and it cannot be tracked. But every society will have rules that expect compliance from all members, and it will penalize non-compliance,” Gandhi said. “A state will always want to give freedom to its citizens in terms of economic transactions. It enforces contractual obligations and taxes income and gains. So, any economic activity should be amenable to these kinds of things.”