The Ministry of Corporate Affairs in India (“MCA”) introduced a notification on March 24, 2021 (“Notification”) requiring companies to disclose details of trade or investment in crypto/virtual currencies. The change will be brought under Schedule III of the Companies Act, 2013 (“Companies Act”). Companies will now be required to disclose details, if they have traded or invested in cryptocurrencies, relating to (a) profit or loss on transactions involving cryptocurrencies; (b) amount of cryptocurrency held at the reporting date; and (c) deposits or advances from any person for the purpose of trading or investing in cryptocurrencies. Whether or not this is a move towards the regulation of cryptocurrencies in India is yet unclear. The Government of India appears to be strengthening the AML/CFT regime around cryptocurrencies by seeking disclosure of the source of funds or investments in crypto-assets. Given that the amendment will be brought out in the Companies Act, the applicability of disclosures would be on a wide range of companies, including private companies.
The notification comes at a time where uncertainty is brewing around the potential prohibition of cryptocurrencies in India. Recently, the Government had introduced the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 (“Bill”), seeking to “prohibit all private cryptocurrency in India”. The Reserve Bank of India has been silent in this regard and until the contents of the Bill are known, it is difficult to speculate as to what extent would cryptocurrency be prohibited or what falls under the category of private cryptocurrencies.
The disclosure requirements provided in the Notification shall be applicable from April 1, 2021. While the crypto industry in India is viewing this move by the Government to be in a positive direction, there yet lies uncertainty as to whether cryptocurrencies will be brought within the regulatory ecosystem in India. What is important to note is that the Government has initiated a regulatory regime for cryptocurrencies, an industry that has been following the norms of self-regulation for some time.
Authored by Shivani Agarwal, Founder and Samaksh Khanna, Co-founder
コメント