Govt asks companies to disclose crypto transactions and holdings

Govt asks companies to disclose crypto transactions and holdings

In a first, the ministry of corporate affairs has asked all companies in the country to mandatorily disclose any dealings in cryptocurrency or virtual currency in their balance sheets. This is a major step towards regulating crypto assets in India and is expected to bring in a lot of transparency in reporting or filing of crypto investments.

According to the latest amendments to the Schedule III of the Companies Act, 2013, the companies have to disclose profit or loss on transactions involving cryptocurrency or virtual currency, amount of holding and details of deposits or advances from any person for the purpose of trading or investing in cryptocurrency or virtual currency. The latest requirements will be applicable from the upcoming financial year.

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“The intent seems to include and regulate cryptocurrencies. While the authorities are preparing a regulatory framework, they are looking for information on how many companies are doing cryptocurrency trading or are holding them on their balance sheets," said Pallav Narang, partner at CNK RK & Co Chartered Accountants.

While there are estimated to be around one crore individual crypto investors in India, the number of companies having exposure to this avenue is not known.

“The government’s move is expected to boost institutional adoption of crypto assets. We are eagerly waiting for positive regulatory guidelines from the finance ministry and the Reserve Bank of India for more clarity around crypto regulation in India. It is important to note that Indians have already invested around $1.5 billion into crypto assets, which clearly shows their intent towards embracing digital assets," said Shivam Thakral, chief executive officer, BuyUcoin, a cryptocurrency exchange.

Globally, major companies such as Tesla and MicroStrategy have been holding big amounts of bitcoin on their balance sheets.

Despite the MCA making it official for companies to hold and report crypto assets in their books, experts feel that there is still a disparity on how these assets will be taxed.

“Whether it is going to be taxed as business income, capital gains or speculative income, it is still to be tested. But it is certain that this information will be mined by the income tax authorities to verify whether people have paid taxes on this particular income or not," said Narang.

Meanwhile, the government on its part is in the process of bringing in a Bill on cryptocurrencies. While the contents of the Bill are not yet known, the Centre in February had said that the Bill would seek to ban all private cryptocurrencies such as bitcoin and ether. However, in the recent past, it had hinted that it would take a calibrated approach towards digital assets.

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India Mandates Public and Private Firms to Disclose Crypto Holdings

Indian companies have to disclose their cryptocurrency dealings from the next financial year, which will begin on April 1.

The country’s Ministry of Corporate Affairs amended Schedule III of the Companies Act, 2013 on Thursday to mandate both public and private companies to disclose their cryptocurrency holdings and other activities using digital currencies.

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According to the published gazette, the companies must disclose ‘profit or loss on transactions involving Cryptocurrency or Virtual Currency’, ‘amount of currency held as at the reporting date’, and ‘deposits or advances from any person for the purpose of trading or investing in cryptocurrency/ virtual currency’.

The companies have to report these crypto dealings in both their profit and loss statements and balance sheets.

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Though none of the Indian companies has revealed any cryptocurrency investments yet, many public companies in the United States and Europe have invested heavily in digital currencies, which might have prompted the Indian ministry to bring such reporting laws.

However, it will be interesting to see if the existing Indian cryptocurrency exchanges have made any digital currency investments. US-based Coinbase, which is heading towards a public listing, revealed that it added Bitcoin to its balance sheet in 2012.

Confusions Around Crypto

Last month, the Indian securities market regulator informally directed initial public offering (IPO) promoters to liquidate their cryptocurrency investments.

India’s new crypto disclosure rule came when the country is possibly heading towards a crypto ban. Though the government already drafted a bill and was about to debate it in the recent parliament session, it was not tabled while the session saw an early closure today.

Indian companies will now have to disclose their crypto holdings in financial statements

Indian companies have been mandated to disclose their crypto holdings in financial statements, according to new rules that are coming into force on April 1.

India’s Ministry of Corporate Affairs amended Schedule III of Companies Act, 2013 on Thursday, and it now requires companies to detail their crypto holdings.

The details include “profit or loss on transactions involving crypto currency or virtual currency,” “amount of currency held as at the reporting date,” and “deposits or advances from any person for the purpose of trading or investing in crypto currency/ virtual currency.”

The rules apply for all Indian firms, including private and publicly-listed companies, Amit Maheshwari, partner at accounting firm AKM Global, told The Block. He added that companies will have to report crypto holdings in both their profit and loss statements and balance sheets.

“I think the message is clear. The government is going to examine crypto transactions of companies,” said Maheshwari.

Last month, there were reports that India’s top securities regulator wants promoters of companies looking to go public to sell their cryptocurrency holdings before raising money.

The new rules come as India is said to be banning the use of cryptocurrency. The country’s government was expected to discuss a crypto bill in the Budget session of Parliament but ended up not discussing it as the session ended today. The session was to conclude on April 8 initially, but the plan changed due to Assembly elections in some states.

The crypto situation in India remains confusing, as The Block reported earlier this month. Crypto exchange executives are preparing for the worst-case scenario — a full ban that would force them to relocate. But they are also optimistic that this won’t happen.