India Depends on International Partnership to Decide on Cryptocurrencies
- India is one of the leading Asian countries in terms of crypto adoption. However, the tax laws by the nation’s government could lead to a decline in trading activities.
- Indian authorities introduced a 30% income tax on cryptocurrency earnings and a 1% tax deducted at source.
The crypto community in India has been kept on its toes over the last three months due to the nation’s strict policies on cryptocurrencies. Nirmala Sitharaman, the country’s finance minister, recently requested international cooperation on cryptocurrencies, weighing their benefits and drawbacks to create a uniform framework and taxonomy.
According to her, the Indian central bank reportedly encouraged the government to outlaw the use of cryptocurrencies since they pose a risk to financial stability. Sitharaman made this claim while addressing a question about cryptocurrencies in the Lok Sabha, the lower chamber of the Indian parliament. As per her response, the Indian government is seeking a global approach on how to best handle cryptocurrencies and create uniformity. She explained,
Any legislation for regulation or banning can be effective only after significant international collaboration on evaluation of the risks and benefits and evolution of common taxonomy and standards.
She however added that the Indian central bank’s position on the value of cryptocurrencies is based on assumption. Sitharaman claimed that the value of cryptocurrencies is primarily based on unfounded speculation and unrealistic expectations of big profits unlike the value of fiat currencies which are based on monetary policies and their state as legal tender.
The Indian central bank, Reserve Bank of India (RBI), has adopted a position against cryptocurrencies since 2013, issuing numerous warnings against investing in the industry and even forbidding banks from providing services to crypto businesses in 2018. Following a supreme court decision in 2020, the banking prohibition was ultimately lifted.
India and its Unclear Crypto Stance
The Indian government has also remained unclear on its intention for the crypto space and has not yet decided whether to ban or regulate the emerging crypto industry. However, it moved quite quickly to create and execute two crypto tax regulations that have had a disastrous impact on the sector.
The first tax was a 30% income tax, and the most recent tax, which went into effect on July 1st, was a 1% Deducted at Source on cryptocurrency transactions. But it appears that these high levies have discouraged traders and other market participants.
Trade volumes on three well-known Indian exchanges have decreased by an average of about 72.5 % since July 1. Many crypto enthusiasts in India believe these taxes would slow down crypto activities in the country and possibly push many Indians to explore international options.
Even from a global perspective, the Indian tech industry is humming with eager entrepreneurs and a top-tier talent pool. India is in a good position to be a worldwide leader in this field if the ecosystem keeps growing in the same way as it has over the last few years. However, with the ongoing policies from the government, there might be little room for more growth.
Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.
