New Delhi:

The Union Cabinet could later this week discuss a legal framework for cryptocurrencies, which is likely to propose a complete ban on private digital currencies as legal tender.

The government has held extensive consultations on the legal framework for cryptocurrencies, including at a meeting last month chaired by the Prime Minister. The view in the government is that crypto cannot be permitted as a currency, but stringent regulation can be put in place to allow them to be held as assets.

The Cabinet could consider the cryptocurrency Bill this week and subsequently introduce it in Parliament, a person privy to the plans told ET.

FATF Guidelines

The regulations are likely to prescribe investment ceilings for individuals in line with those on overseas remittance, as also stringent disclosures. Tax treatment on gains and profit made on such transactions would be defined in the upcoming budget, a government official said.

The Reserve Bank of India has voiced reservations, saying cryptocurrencies pose a threat to macroeconomic and financial stability as well as capital controls.

The proposed law is likely to be aligned with the Financial Action Task Force (FATF) guidance. The 2021 FATF Guidance included updates on six key definitions of virtual assets and virtual asset service providers (VASPs), risks and tools to address money laundering and terror financing risks and licensing and registration of VASPs, among others.

The revised FATF standards issued in October require countries to assess and mitigate risks associated with virtual asset financial activities and providers; licence or register providers and subject them to supervision or monitoring by competent national authorities.

BILL SET FOR INTRODUCTION

The government has listed the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 for introduction in the Lok Sabha among the legislation lined up for the winter session. The Bill was listed in the budget session as well but could not be introduced as the government decided to rework it.

The proposed Bill seeks to create a facilitative framework for the creation of an official digital currency to be issued by the Reserve Bank. It aims to prohibit private cryptocurrencies in India while allowing for certain exceptions to promote the underlying technology of cryptocurrency and its uses.

Finance minister Nirmala Sitharaman told the Rajya Sabha last week that the government will bring the Bill to Parliament after the Cabinet clears it.

A high-level government panel, in July 2019, mooted an outright ban on all forms of private cryptocurrencies. It suggested a fine of up to ₹25 crore and imprisonment of as much as 10 years for anyone dealing in them. But the draft Bill has since then undergone several revisions in line with the government's thinking that supports a middle path on these products.

View Full Report on www.economictimes.com