Answer: A crypto-asset is a digital representation of value that can be transferred or stored electronically using blockchain technology. Crypto assets as a digital innovation can create new ways of financing for consumers . It can also present opportunities for cheaper and faster cross-border payments by limiting intermediaries.

Common crypto assets include cryptocurrencies like Bitcoin, tokens such as USDC & DAI, Non-fungible tokens including BAYC etc.

Crypto regulation in India

• Legal provision: At present, the administration of cryptocurrencies is under the ambit of the Prevention of Money Laundering Act (PMLA) 2002.
• It requires all entities dealing with crypto to implement mandatory KYC processes, report suspicious activities etc.
• RBI’s stance: RBI has expressed serious reservations about crypto assets, saying that these assets threaten financial stability. 
• In 2019, RBI issued that use of cryptocurrencies in any manner is an offence with penalty and imprisonment.
• In 2020, the Supreme Court of India removed the ban on cryptocurrencies imposed by RBI.
• Regulatory Framework: In 2022, the Ministry of Finance released a report proposing the creation of a digital rupee, a state-backed cryptocurrency, as well as a framework for regulating private cryptocurrencies.
• The report recommended the establishment of a Digital Currency Regulatory Authority (DCRA) to oversee the use of cryptocurrencies in India.
• Tax regime: In 2022, the Union Budget officially classified digital assets, including cryptocurrency, as “virtual digital assets.”
• The government has announced a flat 30-percent income tax on the transfer of “crypto-assets”.
•  The Centre also announced another 1% tax deduction at source (TDS).

Other International Best Practices

• IMF-FSB Synthesis Paper: In the recent G20 summit, the countries endorsed the report by the International Monetary Fund (IMF) and the Financial Stability Board (FSB) on risks and the framework for regulating crypto assets. 

• This includes creating, reporting and licensing mechanisms for the regulation of digital assets by 2025.

• Markets in Crypto-Assets Regulation (MiCA): Framed by the European Union, it is the first cross-jurisdictional framework for crypto-assets. It will bring governance practices to crypto firms.

To ensure effective regulation of crypto assets in India, enhancing financial awareness about the risks and benefits associated with cryptocurrency transactions is important. Robust international collaboration to develop a standardized protocol would  be the suitable step ahead.