Disclosure of crypto holdings not a step towards legitimacy
The government’s decision to make companies disclose their cryptocurrency trades and holdings from 1 April is not a prelude to legitimizing virtual currencies, a government official said.
The government last week amended a schedule of the Companies Act, mandating disclosure of details of cryptocurrency trade, profit or loss from these transactions, the holding on the reporting date and details of deposits taken from anybody for trading in virtual currencies.
The disclosure requirement raised expectations that it was a step towards recognizing cryptocurrency as a separate asset class. However, this move had little to do with cryptocurrencies’ legal status as an asset.
“The government has received complaints about some entities luring people into giving deposits to trade in cryptocurrency. The intention (behind the reporting requirement) is to bring more transparency into who holds virtual currency, how much is the holding and the extent of the transactions taking place. This information will be available to everyone,” the official cited above said.
To be sure, once businesses report their virtual currency assets and transactions, regulators too will enter the picture. The finance ministry recently said it will decide on proposals made by an inter-ministerial panel for a possible legislation on cryptocurrency.
The official position so far on the matter is that all private cryptocurrencies, except any cryptocurrency issued by the State, be prohibited in the country. The government also does not consider virtual currency as legal tender.
One area of major worry for policymakers is the virtual currency’s price volatility and susceptibility to fraud.
The central bank has also warned that since neither it, nor the government has authorized or issued regulation for any entity to deal with cryptocurrencies, individuals have no legal protection in dealing with them and would bear all the associated risks. Also, paying income tax on cryptocurrency gains does not give official backing to this asset.
An email sent to a corporate affairs ministry spokesperson remained unanswered till press time.