India had not yet legislated on cryptocurrencies and financial activities around the blockchain. This will soon be the case with, in particular, the appearance of a central bank digital currency.
India is the second largest internet market in the world. As such, the country is not immune to the phenomena of cryptocurrencies and NFTs. The government has been thinking for a while about how to regulate the rise of these trends and has just announced that it will launch its own cryptocurrency next year. By then, he also plans to introduce a new tax on earnings related to these “products”, after having officially recognized the activity of virtual currencies.
Nirmala Sitharaman, Minister of Finance, is under pressure from all sides to regulate this new market, while the volume of transactions has exploded in the country in recent months. WazirX, a subsidiary of Binance, estimated the increase in annual trading volume at 1,735% compared to 2020, for a total amount of some $43 billion. This progression is accompanied by large global investors already present in the crypto market, such as Andreessen Horowitz who started investing in India last year by supporting the CoinSwitch Kuber platform. And Nirmala Sitharaman observes: “The scale and frequency of these transactions have made it imperative to provide a specific tax regime.”
A reassuring legal framework
Regarding the CBDC, the digital currency of the country’s central bank, it has been in the testing phase for several months, so that its impact on the banking and monetary systems can be assessed. “The introduction of a central bank digital currency will give a big boost to the digital economy. The digital currency will also lead to a more efficient and cheaper currency management system”explains the minister.
The opposition is concerned to see such projects emerge without the New Delhi government having provided reassuring elements regarding the regulation of cryptocurrency exchanges. Recalling that cryptos can be used for the conduct of illegal activities, money laundering or even the financing of terrorism, Randeep Singh Surjewala, spokesperson for the opposition in Congress, wonders: “Is cryptocurrency now legal, without bringing the cryptocurrency bill, as you tax cryptocurrency? What about its regulator? What about the regulation of crypto exchanges? about investor protection?
The platforms are very positive about the implementation of measures to bring clarity and stability to the cryptocurrency and NFT markets in India. “Tax clarity is a welcome move. Overall, it is a huge relief to see that our government is taking the progressive stance of moving forward in the direction of innovation. By introducing taxation, the government largely legitimizes the industry. The majority of people, especially businesses, who had stayed away due to uncertainties will now be able to participate in crypto”says Nischal Shetty, managing director of WazirX.