Various cryptocurrency players have welcomed the directive by the Ministry of Corporate Affairs to disclose their investments in crypto or virtual currencies. As per the directive, companies will now have to declare the source of funds and profit or loss earned through crypto transactions.
Experts agree that the overall governance, risk, compliance and corporate ecosystem have to become far better equipped to deal with emerging models and disruptions such as the cryptocurrencies that are clearly ahead of the regulatory purview cycle. Crypto players feel that it is a positive sign from the Indian government to accept cryptocurrencies as an investment asset.
“In light of the recent speculation around banning, allowing cryptocurrencies to be a part of accounting practices will definitely put investors at ease as they no longer have to be worried regarding taxation. This is a definite endorsement and it is good to see that India is not falling behind the global cryptocurrency race. Bringing regulation that provides safety to investors, factors taxation and fosters cryptocurrency as an alternate investment class will be the right step ahead,” remarked Monark Modi, the founder and CEO of Bitex, a cryptocurrency exchange.
A few players feel that the move is a much-needed step towards creating an inclusive financial ecosystem that embraces crypto. “It will bring in a lot of transparency and will act as a comfort for companies that are dealing in cryptocurrencies and were previously confused on how to put it in their books,” pointed out Sharan Nair, chief business officer, CoinSwitch.
Crypto experts point out that declaration and taxation leads are positive steps for the industry and its adopters as it is the first step towards regulation of the asset class. Experts observe that the government has recognised crypto as an asset and this will help in putting down a taxation structure for the same. They also highlight the fact that cryptocurrencies have been the best performing asset over the last 12 years and it is clear to us that it will be the best performing asset class of the next 10 years as well.
“This declaration gives genuine investors a clear opportunity to own and benefit from the upside of the assets. A blanket ban would have forced out any investor or company that wants to be fully compliant and have an unintended consequence of an emerging grey market that is counterproductive to the regulator’s intentions. It also helps to clearly differentiate the good and bad actors of the space. It adds legitimacy and a clear path for good actors to continue owning the assets they are bullish about. It also legitimises cryptocurrency businesses as profitable and taxable ventures,” said Darshan Bathija, CEO of Vauld, a global crypto exchange headquartered in Singapore.
The government order has also come as a breather for the crypto industry that will help it pull out of uncertainty, especially when cryptocurrency has been seeing a positive momentum and interest among investors in the country. “Such a move will help our government understand the size of the market and the growth in the crypto industry. This move also brings in legitimacy to the sector by way of formal disclosure of crypto activities,” remarked Nischal Shetty, founder and CEO, WazirX.
Many crypto players and experts are happy that this move was already in demand by the crypto players and the industry and many of them were already adhering to self-regulating compliances even before these directions. “We have always encouraged our members to comply with the tax laws as well. This is a positive sign that the government is taking cryptocurrencies seriously. We are looking forward to regulatory clarity on classification and taxation of crypto assets that will help both companies and individual investors in the Indian cryptocurrency ecosystem,” said Vikram Rangala, CMO, ZebPay.
Instead of rushing investments into crypto and alternative assets, corporates must build newer risk appetite models as they are necessary to bring in better control and investor confidence in the system. “There must be a higher level of due diligence and audit to be done to ensure that the overall governance must give the confidence to investors and shareholders that their investments are not at risk and there will be more transparency and reporting going forward. The entire compliance and reporting accounting and audit systems need to be rewired to ensure wide and quick coverage of any new transactions on crypto investments with a detailed risk trade-off model. This push by authorities and regulators to ensure that corporates are well-equipped to deal with crypto comes at a good time and will restore investor and shareholder confidence that any dealings in crypto space are recorded, audited and managed,” explained Sudin Baraokar, Global IT and Innovation Adviser.