4 min read.Updated: 13 Jan 2021, 10:20 PM ISTRicha Roy
A regulatory system must be in place before we can address the question of taxing crypto trades
In March 2020, in a magisterial judgement, the Supreme Court set aside a circular of the Reserve Bank of India (RBI) that banned regulated entities from providing any service related to the purchase and sale of virtual currencies. Although the SC reaffirmed RBI’s power to regulate such currencies, it said any restraint or regulation must be exercised with proportionality and responsibility, backed by adequate empirical evidence. This set the stage for the regulation of cryptocurrency. Rather than stifle innovation, regulation must foster the development of this sector for it to fulfil its potential for financial inclusion. It can aid international remittances and reduce transaction costs in payment services, all of which were recognized by the Financial Action Task Force (FATF) as far back as 2014, even while warning of the risks of money laundering and terror financing. Regulation should fill the breach, following the SC judgement, removing uncertainty while also mitigating the risks presented by cryptocurrency.