The Indian government may be looking to define what is or is not a non-fungible token (NFT).
Indian Finance Minister Nirmala Sitharaman announced the national budget on Tuesday and found that it will tax digital assets at a rate of thirty%. However, a different section is causing more concern in the cryptocurrency industry.
The section in question defined virtual digital assets, the term the government used in the budget to describe cryptocurrencies or NFTs. According to the budget, "for the purposes of this clause, (a) 'non-fungible token' means any digital asset that the central government may, through notification in the Official Prospectus, realize."
This clause can be interpreted in 2 different ways. The government may have proposed a law that gives it the power to decide what is or is not an NFT. Every NFT should go through a certification process and the power to choose, rate, classify or otherwise label a collectible as an NFT will rest with the government.
The second interpretación, más suave, es que el gobierno certificará categorías de NFT. For example, a memorable moment in Indian history or a portrait of a celebrity may be certified as historical moments or celebrities respectively, but a digital artwork by an unknown artist may not be certified/specified Para nada.
The third and most lenient interpretation is that the government has called an NFT a "virtual digital asset" but has preserved the power to say it is not an NFT. In other words, the government retained the power to exclude through notice.
At least 3 senior industry representatives have confirmed that their legal teams are trying to make sense of this clause.
A senior legal representative of a major Indian crypto exchange explained that reading the fine print suggests that the government claims it will list or otherwise certify each NFT.
Shehnaz Ahmed, Senior Resident Fellow and Lead (Fintech) at the Vidhi Center for Legal Policy, explained how crypto assets and NFTs fall under the definition of "virtual digital asset," but the government has treated NFTs separately from cryptocurrencies.
“Unlike the definition of crypto assets, which is clearly established in article 3(b) of the bill, what is considered an NFT will be defined in a notification that will be issued by the central government to understand if the notification defines general terms and peculiarities. of NFTs or specific categories of NFTs,” Ahmed said.
Bibin Babu, co-founder of Colexion, an NFT marketplace, said he is "satisfied" with the government's role in certifying each NFT or NFT category.
However, Babu believed that only one interpretation was possible. Babu claimed that "it is impossible" for the government to "specify" every NFT when "millions of NFTs are being minted every single day."
"They will classify it as a work of art, nostalgic memories or a sporting moment, etc," Babu said.
A representative of another exchange that focuses on trading rather than NFT, who requested anonymity, agreed that the clause was "surprising" and said that "the question is who or what department will define" or detail what it is? an NFT and what is not.
"The legal teams are going to take some time to delve into the meaning of the clause, as the focus now is on the tax clauses on assets and transfers of funds and their consequences," the source said.
Anirudh Rastogi, Managing Associate at Ikigai Law, which regularly advises multiple stakeholders on cryptocurrency-related policy issues, stated that “the interpretation that each and every NFT will count is impractical.”
"No other regulator has tried to define NFTs. Unfortunately, the bill gives too broad a definition. They recognized NFTs but didn't define them. It's a good thing they left it undefined. They realized it was nuanced and needed deliberation, with what we leave for later,” Rastogi said.
Some industry leaders have interpreted the wording as being developed to give the government the power to exclude or otherwise hold its own against certain NFTs, rather than today anything sold as NFTs falls under the government's jurisdiction and tax policy. of thirty%.
Shivam Thakral, director of BuyUcoin, was one such industry leader, claiming that the government had "widened its phantom" to take into account "future developments" it might feel like avoiding.
A senior lawyer who has worked with the government on crypto in the past has confirmed that the government has preserved an exceptional power that gives it the ability to discourage certain works of art.
"For example, the government may want to stay away from popular currencies on the Silk Road. They may only target the most popular and most frequently traded NFTs or they may use them by volume, class or type," he said. the legal source.
Edul Patel, CEO of Mudrex, a crypto asset management platform, also considered that the government used a "very broad definition as an exclusion mechanism", a kind of "general statement" that includes each and every NFT as digital assets. virtual mas gives them the power to exclude certain NFTs at a later stage.
"Details are lacking, the language is lazy and will be further developed as we receive more money bill documents," Patel said.
India's Finance Ministry did not respond to a request for comment.