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Former Reserve Bank of India (RBI) deputy governor, R Gandhi, believes that crypto can be used for payments towards economic activities, weather buying goods or services, once it has been termed as an asset or as commodity.  

“It is a valid legal activity," Gandhi said at the inaugural session of India’s first ever crypto-asset conference, HODL–2021, organized by the Blockchain and Crypto Assets Council (BACC) of the Internet and Mobile Association of India (IAMAI). 

Outlining a possible regulatory framework for crypto assets, the former deputy RBI governor said that that crypto needs to be treated as an asset and should be taxed on the basis of its payment channels.  

As per recent media reports, the government may also define cryptocurrencies as an asset or commodity for all purposes, including taxation. It may also come up with a way to define cryptos as per their use cases such as payments, investment or utility. 

“On entry in a citizen’s hand, crypto should be deemed as a foreign asset. Then, it should be paid through normal channels when it is bought, if not, it will be deemed as mined, and the capital gained and taxed heavily. Then if it is proved mined, capital gained and is taxed slightly lightly. It should be fully tracked through a depository or repository of information. Then exchanges can facilitate trade– buy and sell–and settle payment and receipt," Gandhi said. 

Gandhi, however, opined that it will be a matter of concern for monetary authorities once a large section of people starts using crypto assets as a means of payment. 

“Then the question will arise, whether monetary transmission will be possible or not using crypto. Right, now it is not very clear. Here, we can have an open mind about how monetary transmission will take place even through crypto assets. I don’t have any research to confirm that, so, it is my belief that even crypto assets would be sensitive to monetary action," Gandhi said.  

According to the expert, access to authentic information on how much of crypto has been mined and how much is being bought, sold or held by people would facilitate regulations. 

The expert believed that crypto has come a long way in terms of its principles. 

“Originally, it came out of the mistrust about authoritarian currency, and in a sense, the philosophy was to some anarchist disruption. The idea was that this is a money, which could not be taxed or traced. Thereafter, the principles have completely changed, including in India. Now, more and more people are putting faith in it and they want to deal in it legally," said Gandhi. 

During the session, Gulshan Rai, India’s first cyber security coordinator and advisory board member, BACC, said that regulators should look at cryptocurrencies in a democratized and sustainable manner. 

From the industry’s perspective, Sumit Gupta, CEO, CoinDCX said that blockchain technology, which enables the existence of cryptocurrency, can be even more transparent than the current fiat systems. “If we use the right tools and technology, then we can create an even better ecosystem than we currently have," Gupta added. 

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