While the Centre’s intent to bring a legislation on digital currency is “good”, it requires more detailing, including the fine print, says Subhash Chandra Garg, former Finance Secretary, who headed the inter-ministerial committee (IMC) that drafted the cryptocurrency Bill- Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019

According to him, “digital currency is the future” and “sooner and later it will be mainstream”. The RBI has not experimented with the model and there are “enormous amount of design issues” that need to be taken care.

“It is a statement of good intent. But enabling legislation has to be brought in first, definitions made clear and outlined,” he told BusinessLine.

For instance, changes to legislation would mean amendments to the RBI Act or bringing in new legislation to allow the central bank regulatory powers over the digital assets.

On taxation, Garg believes that merely taxing cryptos is not equivalent to granting it legal status. Tax is paid even on “income from illegal businesses”.

“After the Supreme Court permitted cryptos as legitimate there really has been no regulation. And all incomes are taxable normally. It does not matter whether it s a legal or illegal source. However, in case of cryptos, there were some people who were declaring the income from it and paying tax on gains. Now there is some direction on,” he said.

However, what needs to be cleared now is where will the one per cent TDS be charged, whether it is to be paid by the buyer, seller, or the exchange. Tracking of transactions that take place outside exchanges or in exchanges outside of India, also needs to looked into.

The taxation, now will allow cryptos to be treated “more like an asset”, rather than a currency.

“All currencies are assets. But every asset is not a currency. Use of crypto as a currency has gone down. And with the current taxation regime, it more effectively being looked at as an asset instead of a currency,” Garg said.