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Disclose cryptocurrency dealings: MCA To Cos

Disclose cryptocurrency dealings: MCA To Cos

The MCA’s move comes at a time when the government and Reserve Bank of India are putting efforts to tighten the framework for regulating cryptocurrencies.

The Ministry of Corporate Affairs (MCA) has made it mandatory for all companies to disclose their dealings in cryptocurrencies.

The Ministry of Corporate Affairs (MCA) has amended various rules under the companies law pertaining to an audit, auditors and accounts. Besides, by making changes to Schedule III of the Companies Act, 2013, there are increased disclosure requirements, including details about their dealings in cryptocurrencies, if any.

The changes mentioned in the notification will come into effect from April 1.

The MCA’s move comes at a time when the government and Reserve Bank of India are putting efforts to tighten the framework for regulating cryptocurrencies and looking at even introducing a sovereign digital currency bill banning the virtual currencies.

As per a PTI report that cited a senior official, if companies are indulging in trading cryptocurrencies, then there should be transparency about the magnitude and how much money is being made through such trading activities.

He said there have been complaints in the past about some companies luring investors with a promise of high returns by investing in cryptocurrencies and there were also instances of people losing money.

The official also said the latest changes in rules are complementary ones to CARO — Companies (Auditor’s Report) Order. CARO will be applicable from the next financial year. These are also aimed at enhancing transparency, he added.

Schedule III pertains to general instructions for the preparation of balance sheet and statement of profit and loss of a company.

Prateek Agarwal, Partner at Nangia & Co LLP, said amendments to Schedule III will give more insights to various stakeholders/ users of financial statements about specific items and will also make the financial information/ benchmarks comparable between different companies.

“Further, some of the requirements are more detailed mandatory disclosures in the financial statements of the existing financial statement captions,” he said.

In another change, companies that use accounting software for maintaining their books must use software that allows them to record the audit trail of each and every transaction and also ensure that the audit trail cannot be disabled. This will be applicable from the financial year starting April 1.

Agarwal further said that the accounting software “requirement is a welcome step towards transparency although it might have a significant impact for some smaller businesses in case the existing accounting software does not support the needs.”

Global Cryptocurrency Exchange Bitex Founder and CEO Monark Modi said 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.

Bringing regulation that provides safety to investors, factors taxation and fosters cryptocurrency as an alternate investment class will be the right step ahead, he added.




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