CBIC working on mechanism to deal with smuggling proceeds seized in cryptocurrencies
Central Board of Indirect Taxes & Custom (CBIC) has said that it is working on a system to deposit seized cryptocurrencies as part of smuggling proceeds. This year, CBIC has come across a number of cases where payments were made in crypto.
Earlier, Central Board of Indirect Taxes and Customs (CBIC) and Narcotics Control Bureau unearthed payments of approximately ₹2.2 crore made through cryptocurrency in 11 cases linked to drug trafficking.
This is first of its kind. Rule 121 of Custom Act says that where any smuggled goods are sold by a person having knowledge or reason to believe that the goods are smuggled, the sale/proceeds thereof shall be liable to confiscation. Now, the challenge is, what will happen when payment is made in unregulated/ unrecognised currency.
On special account
When asked about this issue, Vivek Johri, Chairman, CBIC said, “Law is robust enough to deal with it. You just have to have technological solution to be able to seize it, which we found.”
Further he said that it will be just like seizure of proceeds in smuggling cases. “We have created a special account to park it for the time being. We are working out details,” he said.
Johri also highlighted about another innovation, 3D printing, which is posing challenge to customs personnel.
“I am just imagining, a time will come when people will import 3D design and then have it printed in India. In such a situation value of good will shift to design. So you can just buy the design either online or import it and then get it printed in India. It means some change required in Customs Law,” he said while adding that law will need to keep pace with technological changes.
The issue about came into limelight when Finance Minister Nirmala Sitharaman raised the issue about payment for smuggling done in cryptocurrencies.
“If there are people coming to pay with cryptocurrency, how is he (Customs officer) going to respond? Is it going to be the 1960s India where he says no don’t come near me, go away, or is it going to be the 2020s India where you found a way to sort it out, but didn’t do anything violative of that,” she had said while addressing the Custom officers to mark the occasion of 60th anniversary of Custom Act.
Beyond regulatory limits
Cryptocurrencies and Non-Fungible Tokens (NFTs) are by definition borderless and require international collaboration to prevent regulatory arbitrage. As of now, these are neither legal nor illegal.
Also, there is no regulation. Government has always maintained that any legislation for regulation or banning the possession of, and trade in such a borderless sector can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.
Now, government is working on a detailed strategy to deal with such instruments. As part this, training is being given to the field officers on cyber and forensic technologies besides instructing them about collection of evidences through electronic means.