- Summary:
- The Indian Crypto sector is set to come under government regulation, with a tax regime already outlined. Find out why this matters.
The Indian crypto Industry is set to come under government regulation. The Indian government has announced its intention to mainstream and tax virtual digital assets. The decision comes after a long period of uncertainty surrounding the future of cryptocurrencies in the country.
Yesterday, the nation’s Finance minister announced a 30% tax on income from cryptocurrencies and virtual digital assets. Additionally, the minister, Nirmala Sitharaman, revealed that India will launch its Central Bank Digital Currency (CBDC) by April 2023.
While the 30% tax rate may be high, it offers a reprieve that India is not about to ban cryptos. As recently as November 2021, the Indian government had strongly indicated that it was about to illegalize digital assets.
The Indian parliament considered passing a bill to impose an outright ban on cryptocurrencies. Also, the country’s central bank had voiced its concerns that cryptos could potentially destabilize the nation’s economy. Furthermore, Prime Minister Narendra Modi’s criticism of the assets added to the perception that cryptocurrencies faced a bleak future in India.
Despite the latest reprieve, however, some crypto industry experts view the 30% tax as excessive. Some see it as punitive and likely to stifle the industry’s growth. For instance, there are concerns that some investors may liquidate their crypto assets and invest in other markets.
Why crypto legalization in India matters
The Indian crypto market is integral to the industry’s global development due to many factors. First, India is the world’s second-most populous country and the sixth-largest economy, with a GDP of over $2.5 trillion. Secondly, conservative estimates show that the country could be having about 20 million crypto holders. The country’s crypto investors hold about $5 billion worth of crypto assets.
Furthermore, India is among the world’s most technologically advanced nations. Some of the leading crypto projects are based in India. Therefore, creating a regulated crypto environment in India will give investors renewed confidence in digital assets. Additionally, it will likely attract more institutional investors and crypto-centric venture capitalists to the country.