Indian crypto platforms request regulatory clarity from RBI

• Indian crypto exchanges have approached the Reserve Bank of India, seeking clarity regarding their legal status.
• Indian apex court recently lifted the ban restricting financial institutions from dealing in cryptocurrencies.
• However, there still is no clarity regarding the regulatory status of crypto in the country. 

According to an Economic Times report, Indian crypto platforms have reached out to the Reserve Bank of India (RBI) seeking clarity regarding their legal status and tax policies. The Supreme Court of India recently lifted the RBI’s two-year-old ban that restricted financial institutions from dealing in cryptocurrencies. However, there still is no clarity regarding the regulatory status of crypto in the country. 

Crypto exchanges have reached out to the RBI as money lenders in India are continuing to deny banking services to them on account of a lack of clarity from the bank. Additionally, exchanges are demanding clarity regarding their categorization for tax reasons as well. In particular, they want to know if they’ll be put under the umbrella of a commodity, currency, goods, or service. This is important as it will have a major impact on their tax treatment under the newly introduced Goods and Services Tax (GST) framework. 

Praveenkumar Vijaykumar, Chairman and CEO of a crypto firm named Belfrics Global, said:

If the digital assets are not exempted from GST, the digital currency exchanges in India are going to have a standoff with the tax authority. In early 2019, the tax department had reached out to several cryptocurrency platforms in this regard. In the wake of the recent Supreme Court ruling, we have also approached the RBI for clarity on this, as if we pay GST on the whole transaction, then most platforms would not be able to survive.

Ambiguity around the legal treatment of crypto is not a new issue in India. The country’s indirect tax department has conducted many investigations to determine if Bitcoin could be brought under the framework of the GST. Apart from this, India’s sales tax department and VAT authorities also initiated an investigation on the taxable nature of Bitcoin a few years ago. 

Earlier, an RTI was filed by Naimish Sanghvi of CoinCrunch, asking if the regulator was working on a policy to manage crypto and whether banks had been notified about the lifting of the ban on virtual currencies. The RBI responded by saying that these questions do not qualify as “information” under section 2(f) of the RTI act. 

Sidharth Sogani, CEO of CREBACO Global, said that after the apex court’s ruling, the RBI was supposed to notify banks instructing them to provide financial services to crypto platforms. But banks have continued to deny services because they haven’t received any notification from the RBI. Sogani added:

Banks cannot deny the service after the Supreme Court judgment, they are just playing safe as banks will always be anti-Bitcoin, but because of this huge potential is getting sacrificed.