Cryptocurrencies and other digital assets are gaining traction across the world as it is the most significant and proven ‘use-case’ in the Web3 and blockchain ecosystem.
An increasing number of businesses are using Bitcoin and other digital assets for investment, operational, and transactional purposes. The adoption of cryptocurrencies has been boosted by businesses like Tesla, PayPal, Visa, Mastercard, and so on.
Countries in Asia, Africa, and Latin America are at the forefront of adoption. El Salvador and the Central African Republic have even adopted Bitcoin as legal tender in their countries.
As per data, global crypto ownership rates are at an average of 4.2%, with over 420 million crypto users worldwide. By 2030, analysts predict that the market for cryptocurrencies will have more than tripled, reaching a value of close to $5 billion.
Web3 adoption in India
Web3 is the next upgrade of the Internet. Technology
giants like Facebook, Google, TCS, Tesla, and finance giants like
MasterCard, BlackRock Investments, PayPal, Samsung, Goldman Sachs,
and BNY Mellon, have all invested in Web3 projects.
In line with the framework of the country’s larger Web3 ambition and the active developer environment, the Reserve Bank of India (RBI) had started a trial of its retail central bank digital currency (CBDC) or e-rupee in four major Indian cities – Mumbai, New Delhi, Bengaluru, and Bhubaneswar.
India is home to more than 450 Web3 startups and has the third-largest Web3 talent pool in the world. India has a thriving crypto environment but lacks any regulations on digital assets.
In the Union Budget of 2022, the government introduced a 30% tax on crypto profits sparking uproar and dismay among those in the country's crypto industry.
In addition to the capital gains tax, investors also have to pay a 1% tax deducted at source (TDS), as well as taxes on crypto gifts, with no capacity to take deductions for losses.
Budget expectations for 2023
One of the prime expectations from the Budget 2023 is that the government should rationalize the 30% tax on capital gains and the 1% tax on TDS to build a robust IT and Web3 ecosystem that would support innovation and growth in the nation.
This tax regime has discouraged investors from trading on Indian exchanges and moving to foreign exchanges that do not deduct TDS.
Industry insiders anticipate that this Union Budget will establish a legal framework for digital wallet businesses as well as a single point of clearance for them to register and conduct business in India under the
supervision of relevant regulatory bodies.
To increase the confidence of institutional and retail stakeholders, India will also need professional digital wallet infrastructure businesses that are regulated, compliant, and licensed in the country.
“ Apart from TDS and tax rationalisation, the crypto sector is looking for policy and taxation support. A robust policy to govern the sector will ensure more clarity for companies and regulators. Policy support would mean two things: laws and guidelines to govern the sector and enablement of the ecosystem through banking support." said Vikram Subburaj, co-founder and CEO of Giottus crypto exchange.
Businesses in the cryptocurrency sector require strong assistance, including banking services. In India, banks have the technical and cerebral wherewithal to assess meritorious crypto projects. Despite their high levels of compliance and adherence to the law, these businesses are frequently at the mercy of law enforcement.
