The Indian government has mandated companies to disclose their cryptocurrency holdings. The disclosure will be a part of the financial statements of the company, aimed at giving a better picture of the company’s finances to the stakeholders.
According to a notification released by the Ministry of Corporate Affairs (MCA), every company which has indulged in cryptocurrency transactions will have to disclose the following facts:
- Its cryptocurrency holdings as on the date of the financial statements.
- The total profit or loss on transactions involving these crypto or virtual currencies.
Deposits or advances received from any person for the purpose of trading or investing in these currencies.
- These disclosures will be required starting on April 1, 2021, which is when India’s financial year 2021-22 begins
The timing of the MCA notification is important, since it comes at a juncture when there is ambiguity in terms of legality of cryptocurrencies in India. For what it’s worth, the government has proposed a bill to regulate and even ban cryptocurrencies. However, the official word on this is still not available.
The addition to cryptocurrency-related disclosures in the financial statements of companies is a significant decision. For one, it gives an air of legitimacy to these transactions. And secondly, it shows the government’s intent to regulate cryptocurrency investments and trading.
“It is a welcome move as the amendment is a great stride towards a regulated environment which is what the industry has been eagerly anticipating. Besides ushering in transparency for the system it will enhance the confidence of investors both retail and institutional especially in the wake of ongoing speculations around the cryptocurrency bill,” said Sumit Gupta, co-founder and chief executive of CoinDCX, a Mumbai-based cryptocurrency exchange.
Gupta also stressed on the need for regulation and taxation, suggesting this should be the way forward instead of banning cryptocurrencies.
“In light of the recent speculation around banning, allowing cryptocurrencies to be a part of accounting practices will definitely put investors at ease as they no longer have to be worried regarding taxation,” said Monark Modi, founder and chief executive of Bitex.
Modi further added that this is a ‘definite endorsement’ and that regulation is the ‘right step ahead.
Kumar Gaurav, founder and chief executive of Cashaa, said that this allows cryptocurrency transactions to be treated in a legitimate manner.
Overall, with the industry receiving this notification in a positive manner, the retail investors can heave a sigh of relief. Even though the notification does not impact them directly, it is a step in the right direction as far as legitimising and regulating cryptocurrencies in India is concerned.