Since the RBI lifted the infamous crypto ban back in March 2020, the Indian crypto industry has come quite some way. Indian crypto exchanges have been noting a surge in user registrations and daily trading volumes in the post-Covid times. India, today, has more than 20 million registered crypto users.
As for the regulatory status of crypto in India, while there are still no definite guidelines, India has admittedly moved several steps closer to a positive regulatory environment surrounding its crypto markets in recent times. What’s more, the general Indian populace’s interest in all things crypto continues to increase.
How far have the Indian crypto markets come in terms of regulatory clarity?
While several Indian government officials seem to be warming up to the concepts of crypto and blockchain tech, as mentioned before, there are no set rules Indian crypto markets and traders can abide by yet. The Union Budget 2022–23 was strongly expected to shine some light on the regulatory status of crypto in India, but the Budget didn’t end up noting anything on the matter. The Budget did, however, announce a ‘crypto tax’, and hint at the government’s plans to introduce an Indian CBDC (central bank digital currency).
What does the Union Budget 2022–23 say about crypto in India?
As declared by the Indian Finance Minister Nirmala Sitharaman on February 1, 2022, there are now special taxes imposed upon crypto trades carried out in the country. The incomes an Indian has from the transfer of virtual assets are now to be taxed at a rate of 30%, without any deductions or exemptions.
In Budget 2022–23, crypto assets have been defined as ‘virtual digital assets’ by the government. Notably, this is the first time any policy in India defines cryptocurrencies.
Here’s what the new rules of the crypto tax state:
- Any income generated from the transfer of virtual digital assets are to be taxed at 30%
- A 1% tax (tax deducted at source) will additionally be applicable to any payments made related to the trade of virtual digital assets
- If a virtual digital asset is gifted to someone, the transaction is supposed to be taxed in the hands of the recipient
Along with the crypto tax, the Union Budget 2022–23 also announces the prospects of an Indian CBDC. As per Sitharaman, the Reserve Bank of India (RBI) is on its way to issuing a Digital Rupee in the next financial year.
It’s true that a 30% tax is one of the highest. Still, even though it may not seem like it, the Union Budget 2022–23 is actually good news for India’s developing crypto markets. It is, without a doubt, the first step towards the recognition of digital currency by the Indian government.
Why do we remain hopeful about positive regulation for crypto in India in near future?
After the rumoured cryptocurrency bill of 2021 got shelved, the Government of India seemed to have postponed crypto regulation in the country indefinitely. However, the newest move to tax income from crypto trades can be seen as a sign of acceptance by the government.
The delay in the introduction of crypto-related regulation in India indicates the government is putting serious consideration into regulating crypto and relevant technologies, and therefore would not hurriedly introduce any harsh regulations. After all, as the Union Finance Minister has noted several times, the government remains open to allowing a window of experimentation to back innovation within the crypto and blockchain space.
Indeed, the Indian government seems to have simply adopted a ‘wait and watch’ policy regarding all things crypto, similar to most of the developed countries of the world.
Plus, the recent expansion of the Union Cabinet has led to technology-friendly ministers like Ashwini Vaishnav and Rajeev Chandrasekhar joining in, which just might spell benign regulatory policies for the Indian crypto markets.
One more reason for the Indian crypto community to be bullish on the future of crypto in India: the Indian Venture Capitalists (VCs) are getting increasingly intrigued by up and coming crypto projects. This means more and more innovative concepts and startups in the DeFi space can come to fruition.
Finally, according to recent reports, the Indian government is close to finalising its consultation paper on crypto. As the Economic Affairs secretary Ajay Seth puts it, “We hope that we will soon be in a position to finalise our consultation paper. Simultaneously, we are also beginning our work for some sort of a global regulation (to determine) what role India can play.”
While this consultation paper does not imply that a regulatory framework for crypto in India will follow soon after, there’s no denying that the Indian government has begun to recognise the potential of crypto.
To sum it up, the Indian government has actually further fueled the crypto ecosystem in the country with the Union Budget 2022–23. In fact, initial reactions to the introduction of the crypto tax have been largely positive. Now seems to be the right time for the crypto space to build further on the opening we have been granted, while the government gets ready to enforce regulatory measures on the crypto markets in the country.
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