Industry experts believe that disclosing crypto holdings and transactions will create an inclusive financial ecosystem and boost investor confidence
In a significant move, the government recently made it mandatory for Indian companies, unlisted and private, to disclose their dealings in cryptocurrency or virtual currency. According to experts, the move is expected to boost the institutional adoption of crypto assets in India and take the industry to the next phase of growth.
Companies such as crypto exchanges earn in cryptocurrency itself, and hold and invest part of their profits in digital currencies.
While the new rule deals with companies’ own holdings, there is uncertainty over whether crypto exchanges will have to share information on the holdings of their customers as well.
"We are not sure, but even if that is there it will be good for the sector. As you need to be as transparent as possible as an industry. There’s no clarification as yet whether exchanges have to disclose holdings of the customers or not," said Nischal Shetty, CEO, WazirX.
As per the notification issued by the ministry of corporate affairs (MCA) on Wednesday, companies have to disclose profit or loss on transactions involving cryptocurrency, amount of holdings and the details of deposits or advances from any person for trading or investing in cryptocurrency.
However, according to Ashish Singhal, CEO and co-founder, CoinSwitch Kuber, the rule will not make it mandatory for exchanges to share customer’s data with the government. “Wallets or companies like us, we don’t put account users’ balances on our books. So that is not our money," he said.
But Singhal believes that it might be a good thing if the user data is shared with the authorities.
“Stock investment platforms report to the authorities your stock brokerage dealings within a quarter against the PAN card. That’s how the framework works across countries as well. Globally, whatever cryptocurrency investors hold, it is getting reported to tax authorities against their identification," said Singhal. “However, that is not the framework in India today."
Industry experts believe that disclosing crypto holdings and transactions will create an inclusive financial ecosystem and boost investor confidence.
“It is a welcome move as the amendment is a great stride towards a regulated environment which is what the industry has been eagerly anticipating. Besides ushering in transparency for the system it will enhance the confidence of investors both retail and institutional especially in the wake of ongoing speculations around the cryptocurrency bill," said Sumit Gupta, Co-founder & CEO, CoinDCX.
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