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Cryptocurrency Law- Why investors shouldn’t hit the panic button

Cryptocurrency Law- Why investors shouldn't hit the panic button - (A)

As the Parliament of India prepares for the introduction of cryptocurrency law in the upcoming winter session, existing individual cryptocurrency holders have started to panic to sell their holdings. The price of Bitcoin has fallen by almost 18% in rupee terms. The price of the USD Tether (USD) also fell 17%.

Why is this panic sale?

There is concern that the government will ban cryptocurrencies. Experts on the subject advise caution.

“We have said from the beginning that there is a regulatory risk with cryptocurrencies. Wait until the regulations are clear and then you can start thinking about buying the parts. According to SEBI, if the government decides to regulate cryptocurrencies and introduce this asset class in the upcoming winter session, that would be much-needed clarity, ”says Rishabh Parakh, accountant and founder of NRP Capitals. As a mutual fund distributor, Parakh does not recommend cryptocurrencies to his clients, but he has invested in some currencies himself. He will hold them personally until regulatory uncertainties are resolved and a panic sale is prevented.

Although the wording of the agenda as it appears on the Lok Sabha website does not use the word “prohibition”, it does address three main aspects: the creation of an official digital currency, the prohibition of private currencies and the exemption of the technology. underlying. , on which cryptocurrencies are based. That, says Swapnil Pawar, founder of ASQI Advisors (registered with SEBI), doesn’t seem to be as bad as people expected. He also noted that the agenda set for the next winter session “is exactly the same as that previously set in January. But a lot has happened since then. ”

Pawar says the government apparently feared the many commercials promoting cryptocurrencies on television during the recent Indian Premier League (IPL). Some ads even said that coins would bring in X percent more than term deposits, calling them a safe tool, etc. He may have attracted many unsuspecting investors. “That shouldn’t be happening,” says Pawar, optimistically adding that regulations could try to control this.

Existing Investors vs. New Investors

Most of the experts Moneycontrol has spoken to currently advise against buying cryptocurrencies. In fact, it hardly takes a week or two for parliament to pass the cryptocurrency law. Jaideep Reddy, Director of Nishith Desai Associates, says: “Cardholders and merchants must wait for the text of an invoice to properly plan their affairs. The agenda item shown is the same for now as it was in January this year, and there is no information beyond a very brief description. ”

Regardless of the government’s decision on cryptocurrencies, many experts believe that a complete ban is unlikely. “They may not allow the use of cryptocurrencies as currencies, which has not been done in India anyway. The government can do this to protect our own legal tender, the rupee, ”Pawar explains. But he says that cryptocurrencies could become an asset class and come under the supervision of a regulator like SEBI, which would then oversee the rules. That way, the fiscal rules would also be clear.

Currently, most accountants do not know how to tax cryptocurrencies, so they treat income under the heading “Income from other sources” and tax it according to the individual tax bracket.

Parakh and Pawar realize that in the worst case when the government bans cryptocurrencies, people will have a window of several months to sell them. “It is extremely unlikely that the government will make the possession of cryptocurrencies illegal. Even the Supreme Court clarified this, ”Pawar explains.

Sajai Singh, partner, JSA associate and lawyer, agrees: “Whatever the government’s decision, it will consider people’s current wealth and not put them at risk. It is the investor and their hard-earned money that is paramount to the government. He wants to protect both of them, so current rightful owners are expected to be protected in any future context. ”

What should you do?

The winter session of Parliament is scheduled to start in a few days and we could see some kind of crypto regulation by the end of this year. However, there is at least some indication of whether it would qualify as an alt currency (which seems highly unlikely) or a fixed asset.

Pawar says some astute investors could take advantage and buy into the robberies. But it’s better to stay away for now.

Ideally, existing investors should keep their coins and avoid panic. It is difficult to predict what laws the government will enact and what it will or will not allow.

“The fact that the government is investigating the regulation of cryptocurrencies is a step forward as it recognizes the technological reach in traditional government arenas,” said Harini Subramani, attorney and founder of HS Law & Associates. Interpreting it and formulating the bill’s agenda at the government level also signify another possibility: The Invesco Blockchain Fund – whose start was postponed last week due to cryptocurrency regulations – could see the day soon.



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