INDIA Law and Practice Contributed by: Shilpa Mankar Ahluwalia, Himanshu Malhotra and Purva Anand, Shardul Amarchand Mangaldas & Co
a blockchain sandbox platform called NBFLite. Several state governments in India are also uti - lising blockchain technologies for supply chain management, land registry, and public record- keeping. 10.3 Classification of Blockchain Assets Blockchain assets are not considered a form of regulated financial instruments. They have not been classified as securities and are not regulat - ed under the current legal framework laid down by SEBI. 10.4 Regulation of “Issuers” of Blockchain Assets The “issuers” of blockchain assets as well as initial sales or offerings of blockchain assets are not regulated under a dedicated legal frame - work. Protection against potential fraud by the issuer or intermediaries involved will be based on appropriate legal recourse under general penal laws and consumer protection legislations such as the 1860 Indian Penal Code, and the 2019 Consumer Protection Act. 10.5 Regulation of Blockchain Asset Trading Platforms Blockchain asset trading platforms as well as secondary market trading networks for block - chain assets are not currently regulated by a consolidated framework. See 6.3 Impact of the Emergence of Cryptocurrency Exchanges . 10.6 Staking Provision of staking and lending services relating to cryptocurrencies or offering of crypto-deriv - atives is not governed by any separate regula - tion in India, though such services may attract the KYC and reporting requirements applicable to VASPs (see 6.3 Impact of the Emergence of Cryptocurrency Exchanges ). Any income from
such services/offerings will have a tax implica - tion (see 10.11 Virtual Currencies ). 10.7 Crypto-Related Lending See 10.6 Staking . 10.8 Cryptocurrency Derivatives See 10.6 Staking . 10.9 Decentralised Finance (DeFi) India has not yet enacted specific guidelines to regulate DeFi. In the absence of specific guide - lines, DeFi is currently governed under the extant regulations on payment systems, payment and investment intermediaries. 10.10Regulation of Funds The current regulatory framework does not con - template blockchain assets. The funds investing in blockchain assets are therefore unregulated. 10.11Virtual Currencies Owing to a lack of clarity on how to classify vir - tual currencies (they do not fall under securities, commodities, currency, payment or security tokens), they remain excluded from most regu - lations. However, after the 2022 budget speech, the GOI declared virtual currencies to be taxed as a separate class called “virtual digital assets” (VDAs). All income from VDAs including cryptocurren - cies is subject to 30% tax (plus cess) in India. The GOI also announced a tax deducted at source (TDS) of 1% on all cryptocurrency-based transactions. A gift of VDAs is also proposed to be taxed in the hands of the recipient. The RBI and the GOI exhibit a marked reluctance to acknowledge cryptocurrency as a legitimate form of currency in India. India is currently pilot - ing the e₹, which is anticipated as a replacement
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