Bitcoin trade may come under SEBI
The government is considering the introduction of a regulatory regime for virtual or crypto currencies, such as Bitcoin, that would enable the levy of the Goods and Services Tax on their sale.
- The new regime may possibly bring their trading under the oversight of the stock market regulator, Securities and Exchange Board of India (SEBI).
What’s the idea?
- The idea is to treat such currency in a manner similar to gold sold digitally, so that it can be traded on registered exchanges.
- It was also suggested that government maintain limited regulation. This means reiterating that crypto currencies are not recognised and those who deal in them do so at their own risk, while focusing on curbing illegal activities.
Benefits of regulation:
- The regulation of such currency will “promote” a formal tax base, while keeping a tab on their use for illegal activities such as money laundering, terror funding and drug trafficking.
What are cryptocurrencies?
- Crypto-currency is a digital currency that allows transacting parties to remain anonymous while confirming the transaction is valid.
- It is not owned or controlled by any institution – governments or private.
- There are multiple such currencies — Bitcoin, Ethereum and Ripple are some of the popular ones.
- Crypto-currency can be used for a lot of legal activities — such as booking tickets, buying coffee or fast food, depending of which retailers accept such currency.
Why their regulation is needed?
Currently, they are neither illegal nor legal in India.
- Bitcoins were in the news recently when during the two global cyber ransomware attacks — WannaCry and Petya — attackers sought about $300 in bitcoin as ransom.
- The market cap for all crypto-currencies has just crossed $100 billion, with most of the increase coming in the past few months.
- On April 1, 2017, the total market cap was just over $25 billion, representing a 300% rise in just over 60 days. One bitcoin today is worth as much as 60 grams of gold.
Why their ban is not good idea?
- Banning such currencies will give a clear message that all related activities are illegal and will disincetivise those interested in taking speculative risks.
- It will also impede tax collection on gains made in such activities and that regulating the currency instead would signal a boost to blockchain technology, encourage the development of a supervision ecosystem (that tracks legal activities and may also assist in tracking illegal activities) and promote a formal tax base.
However, the government is wary that regulation will provide legitimacy to “what is currently ambiguous,” and may lead to further rise in its valuation and end up contributing “to the investment bubble”.