Future of Cryptocurrency in India & The Story So Far
Cryptocurrencies have grown and gained a lot of popularity in recent years. The future of cryptocurrency in India is a topic of significant interest, influenced by government regulations, technological advancements, and market dynamics. The adoption and acceptance of cryptocurrency in India depend on how these factors evolve.
According to Sharan Nair, co-founder of crypto data start-up PYOR and former Chief Business Officer at CoinSwitch, this will create “slight hiccups in the ongoing regulatory negotiations since Binance is a well-known name even for regulators.”
“So this development might create some sort of distrust amongst regulators for other players too. But overall, there is a silver lining to this: it gives regulators the confidence that they have control over the industry and that they will be able to regulate this industry well,” he said.
He added, “There have always been concerns around how Binance has been running its operations. So it's not very surprising what has happened.”
The future of cryptocurrency in India is yet to be decided by the government and other regulatory bodies, and it is a topic of ongoing discussion and evaluation. For a more in-depth understanding of the future of cryptocurrency in India, read the full blog.
Key takeaways
The Indian government has indicated that gains from cryptocurrencies will be subject to a 30% tax and a 1% tax withheld at source in the Union Budget 2022.
India will analyse and decide its position on crypto in the coming months after considering which were part of the Group of Twenty (G20) deliberations.
The Indian government has introduced the "Cryptocurrency and Regulation of Official Digital Currency Bill, 2021," which aims to create a legal framework for the regulation of cryptocurrencies.
What is Cryptocurrency?
Cryptocurrency is a particular kind of virtual money that enables direct online payments between users. These currencies are present in an electric form. These are not physical currencies, unlike traditional currencies.
Cryptocurrencies are only worth what consumers are willing to pay for them on the open market; they have no set legal or intrinsic value. Some examples of cryptocurrencies are Bitcoin, Ethereum, GanderCoin etc. Cryptocurrency can reduce transaction costs and processing time which will help cross-border payments.
Is Cryptocurrency legal in India?
There is no official authority in India that regulates the use of cryptocurrencies as a form of payment. There are no established principles or rules governing the resolution of disagreements when using cryptocurrencies. Hence, crypto trading is done at the investor's own risk.
The discussion surrounding the legality of cryptocurrencies in India intensified when Nirmala Sitharaman, the country's finance minister, suggested taxing digital assets. The government has not yet issued an official statement on the legality of virtual currencies like Bitcoin in India, even though many have welcomed the decision to tax them as the first step towards recognizing them.
Cryptocurrency is in a grey area in India right now. There isn't a strict restriction on it in India, according to the remarks made by the governor of the Reserve Bank of India and other government representatives, including the nation's finance minister. Although unregulated, the Indian government has indicated that gains from cryptocurrencies will be subject to a 30% tax and a 1% tax withheld at source in the most recent Union Budget 2022.
In the long run, cryptocurrencies have the potential to cut transaction costs and time, leading to the flourishing of peer-to-peer lending, remittance payments, and international trade. The Indian government must take measures to build a conducive environment for the growth of the cryptocurrency industry, including the development of a central bank digital currency (CBDC).
Tax on cryptocurrencies in India
The government of India took a step when it introduced taxation on virtual assets in the union budget 2022. Cryptocurrencies are taxable in India since they are regarded as virtual digital assets.
As to Section 115 BBH, gains derived from trading cryptocurrencies are subject to a 30% tax rate plus a 4% cess.
Starting on July 1, 2022, Section 194S would impose a 1% Tax Deducted at Source (TDS) on the transfer of cryptocurrency assets if the transactions total more than ?50,000 (or even ?10,000 in some circumstances) within the same fiscal year.
Any investor, whether private or business, that transfers digital assets throughout the year is subject to the crypto tax.
For both short-term and long-term gains, the investor's entire income is subject to the same tax rate.
That means that profits made by buying, selling, or exchanging cryptocurrencies will be subject to a flat 30% tax (plus an additional 4%). This tax will apply regardless of whether the profits are classified as business or capital gains.
In addition to this tax, selling cryptocurrency assets for more than Rs 50,000 (or Rs 10,000 in certain circumstances) would also be subject to 1% TDS.
Indian Crypto Exchanges
Traditional types of investment have long been the first and safest choice for investors, but there has recently been a noticeable shift in interest in the realm of digital currencies. The widespread use of cryptocurrencies has led to a rise in the number of cryptocurrency exchanges, which are online marketplaces where investors, dealers, and consumers can purchase, sell, and store virtual money.
Similar to a stock exchange, a cryptocurrency exchange facilitates trading in virtual currencies like Ethereum, GanderCoin, Tether, and Bitcoin. These exchanges operate through mobile apps or PC features akin to e-brokerages on digital marketplaces. Exchanges for cryptocurrencies also give their users access to a variety of tools for investing and trading.
The Current Scenario of Crypto in India
India's position on cryptocurrency has been under scrutiny for years. The Reserve Bank of India has advocated for a crypto ban, but the government has not indicated any such position. The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 was introduced in the Lok Sabha, which seeks to create a favourable environment for digital currencies.
Recently, on January 12, 2023, websites globally blocked access to the web platforms of foreign cryptocurrency exchanges and 9 virtual digital asset service providers including Binance, Kucoin, and OKX.
India will analyse and decide its position on crypto in the coming months. The future of the crypto market in India is rich with possibilities. With the right set of incentives and regulations, cryptocurrencies and blockchain technology have the potential to fuel India’s goal of becoming an economic superpower.
Regulatory clarity
In India, the regulatory clarity of cryptocurrency is still evolving. Currently, there is no dedicated regulatory authority exclusively catering to cryptocurrencies. India has not enacted any special legislation for the regulation of virtual currencies, but it has contemporized various statutes to address the challenges and risks associated with cryptocurrencies.
The bill proposes to ban all private cryptocurrencies in India and establish an official digital currency. While India still needs to establish a comprehensive regulatory framework for cryptocurrencies, the government has taken steps to address the regulatory clarity of cryptocurrencies through proposed legislation and by extending existing laws to encompass cryptocurrencies. The evolving regulatory landscape underscores the need for a clear legal foundation to regulate crypto assets effectively.
Ending notes
In conclusion, the future of cryptocurrency in India is promising. The country has shown a growing interest in cryptocurrencies, with major corporations, financial institutions, and individuals adopting the technology. The future of cryptocurrency in India is filled with opportunities and challenges. The country must navigate these complexities to establish a robust regulatory framework and ensure the growth and adoption of cryptocurrencies.
Written By- Manmeet Kaur
