Crypto investors are unhappy as they have to part with 30% of their earnings from crypto currency.
New Delhi: Union Finance Minister Nirmala Sitharaman, during her budget speech in the Parliament on Tuesday, announced that “digital assets” would be taxed at 30%, bringing a mixed reaction from investors and the digital asset industry.
The Finance Minister also announced that India would also soon launch a Digital Rupee on the blockchain, but would be monitored by the Reserve Bank of India (RBI). While the industry hailed the announcement of the Union Finance Minister since it cleared the air around the “legalisation” of cryptocurrency which is a part of the “digital asset” that the finance minister referred to during her speech, crypto investors were seen unhappy with such a decision being made by the finance minister as they now have to part with 30% of their earnings from the crypto currency towards the ex-chequer.
The Sunday Guardian spoke to multiple crypto exchanges that are currently in operation in India and all of them have welcomed the decision made by Sitharaman. Nischal Shetty, Founder and CEO of WazirX, one of the largest crypto exchanges of India, speaking to The Sunday Guardian, hailed the decision, saying that this announcement brings in a new era in the crypto sector in India.
Shetty said, “India is finally on the path to legitimizing the crypto sector in India. India launching a blockchain-powered Digital Rupee is phenomenal news. This move will pave the way for crypto adoption and put India in the front seat of innovation. It’s also interesting to note how our government is beginning to recognize crypto as an emerging asset class given how our FM was referring to it as a virtual digital asset. The biggest development today, however, was clarity on crypto taxation. This will add much-needed recognition to the crypto ecosystem of India. We also hope that this development removes any ambiguity for banks, and they can provide financial services to the crypto industry.”
Nishcal Shetty also added that following the announcement of the Finance Minister on “digital assets”, a 52% jump in people signing up for crypto through their platform has been witnessed. Binance, another crypto exchange operating in India, also expressed their happiness on the announcement by the Finance Minister.
A spokesperson from Binance in a written reply to The Sunday Guardian said, “Regulation is not a negative phenomenon; instead, it signifies a maturing industry and a necessary step for cryptocurrencies to become a full-fledged element of the global economic ecosystem. At Binance, we want to help set the standards for this transformation, and we are working collaboratively with regulators around the world. We look forward to supporting the Government of India as their approach to digital assets continues to evolve.”
Ashish Singhal, Founder and CEO, CoinSwitch, the second largest crypto exchange in India, responded to detailed responses to questions from The Sunday Guardian on crypto currency and digital assets. Excerpts.
Q: How would you like to react to the announcement made by the Indian Finance Minister on “digital assets” which includes crypto currencies in the Budget for 2022-2023?
A: We welcome the government’s decision to introduce central bank digital currency (CBDC) to accelerate digitization. We also believe that various budget measures to improve digital payments adoption will induct more digital-savvy Indians into the financial ecosystem willing to explore newer forms of investing and wealth creation. The regulatory guidance on tax from the government furthers the mainstreaming excitement of this emerging asset class with over $6bn worth of investments in India. It is also the gateway to the future decentralized world, aka Web3.0. Today’s digital-savvy Indians are willing to experiment with this emerging asset class. The budget provides clarity on taxation and shows the government’s intent to take a business-friendly approach while protecting the interest of consumers and the exchequer. We hope to work with the government to help bring crypto-asset taxation at par with other asset classes and participate in the central government’s vision to promote economic growth.
Q: Don’t you think that the taxation of 30% is arbitrary and would push a lot of investors away from this asset segment?
A. We see this as a positive development overall. What it does is that it removes all ambiguity and signals that the government recognizes this industry. Now there are more nuances to this which is: could we look at taxing this at par with other assets like securities. These nuances need to be worked out. The industry is hopeful that the government will work with the industry on some of these finer aspects.
Q: I am sure the government must have had some discussions with exchanges like yours on the crypto currencies; if yes; what were the fears that the government expressed about digital currency? What were the suggestions if any made from your end to the government?
A: As part of the Blockchain and Crypto Assets Council (BACC), the industry made representations on the crypto bill seeking regulatory clarity. The budget announcements provide good clarity on taxation. We are looking forward to a comprehensive crypto law and hoping to collaborate with the government as an industry. From the crypto bill standpoint, we are hopeful that the regulatory framework for crypto-asset investing would focus on four main areas: Crypto should be classified as an asset. There should be a proper framework for the movement of funds. The industry needs rigorous KYC (know your customer) procedures. A proper reporting structure must be put in place.
Q: One of the biggest fears of the government is that such digital currencies could be used by anti-social elements and terrorists alike for anti-national activities. What has been your experience in this so far? Can crypto currency become a place to dump black money? Do you think this requires regulation?
A: As of now, we do not have any clarity or official communication from the government in this regard.