Growing confusion over the regulation of Crypto currency

There has been a significant year-on-year (YOY) rise in both business sentiment towards cryptocurrency and the number of mentions these coins gained in company filings. A positive outlook towards Crypto and blockchain is finally in black and white now! 1st February 2022 has made a mark in the history of Crypto. India is finally on the path to legitimising the crypto sector. This progressive stance from the Government has validated the industry to a large extent. The Government is definitely not thinking of a ban anymore! The finance minister has indicated that Crypto falls under the 'virtual digital assets' bucket and is a special asset class. We stand by the minister’s words that Crypto is not a currency.

On the other hand, a digital currency, governed by the RBI, is also on the cards. It's a piece of phenomenal news that India is launching a blockchain-powered Digital Rupee soon. This move will pave the way for crypto adoption and put India in the front seat of innovation and adoption to web 3.0. There is some good news and some news of a slightly inconvenient nature. At the same time, Finance Secretary TV Somanathan said, “people investing in private crypto should understand that it does not have the authorisation of the government”. All cryptocurrency, non-fungible tokens and similar digital assets will be taxed at a flat 30% rate. And if you intend to use your stash of crypto coins to make a transaction, that’ll attract a 1% tax deducted at source (TDS) too.

Most of the Indian crypto investors have been self-reporting crypto-related income in their income tax returns so far. Now, with the introduction of sections 115BBH (Tax on income from virtual digital assets) and 194S (Payment on transfer of a virtual digital asset), clarity on taxation and Government validation is received. While this is a concise interpretation of the law as it is, more clarity from the Government is expected soon. In the interim, the Crypto markets have reacted positively to these developments, and there has been a significant increase in the BUY market.

In addition to this, our finance minister also pointed out that this budget of 2022 seeks to generate employment opportunities for the youth. As an industry and with the recognition given by the Government, we can confidently say that the crypto sector holds immense potential to create job opportunities as well as contribute to India's $5 Trillion economy vision. Our GDP can benefit immensely from Crypto! Another aspect that we should consider is, from now on, that the majority of people, especially corporates, who had been on the sidelines because of the uncertainties will now be able to participate in Crypto. No doubt, some short-term falls in the market can be expected. But then, there is nothing to worry about as from now on; we can witness several seasoned and serious investors stepping in.

The finance minister clearly said, India’s very own virtual currency by the country’s central bank’s digital currency (CBDC) will be introduced sooner than later. Digital rupee issued by the RBI will be a legal tender. Rest all aren't legal tender, will not and will never become legal tender. With the Budget announcement taking cognizance of this landscape, we await the legal implementation of this emerging asset class in India. This is just the beginning and not the end-game. Lots of positive things are possible and are in store from here.

Deepak Sahu, President & CEO, VARINDIA