Mumbai: The global crypto community has hailed India's announcement to tax cryptocurrencies and create a blockchain-based, regulator-backed digital currency as a significant step toward legitimising the asset class and encouraging blockchain technology innovation.
"This means that India recognises the value of crypto, digital assets, and the underlying technology, blockchain," said Anndy Lian, Chairman of the Singapore-based BigONE exchange. "India could lead the next crypto bull market."
On February 1, Finance Minister Nirmala Sitharaman announced that the government would levy a 30% tax on the transfer of "virtual digital assets."
According to global crypto players, the tax clarity will allow fence-sitters to activate their India investments.
"The tax clarity is a significant step forward." By moving forward in the direction of innovation, the Indian government is taking a progressive stance. The government legitimises the crypto industry and trading to a large extent by instituting taxation," said Serdar Bisi, CEO of Tycoon, a Cyprus-based crypto startup. "This allows institutions and corporations that have been on the sidelines due to uncertainty to participate in this emerging market and industry."
According to Adam Mazzaferro, Founder of Australia-based @pay, people forget that cryptocurrencies are simply another type of asset class, similar to stocks and real estate, and should be treated as such, and the Indian government's announcement has validated the asset class.
"The Indian government's decision to tax cryptocurrencies is welcomed because it is consistent with how other modern economies treat cryptocurrency," said Mazzaferro. "Although the 30 per cent tax rate is relatively high, any form of government regulation of cryptocurrency is encouraging because it goes a long way toward validating the asset and making it more mainstream and widely accepted in everyday business and commerce."
According to Kaz Patafta, co-founder of First Eleven Club and Director of McDonald Patafta & Associate Lawyers, an Australian law firm, the imposition of a crypto asset tax now solidifies crypto adoption in India and allays concerns about a regulatory ban in one of the largest transactional markets for virtual assets.
Wahid Chammas, a Cyprus-based investor and the chairman of Faith Tribe, an open-source fashion design platform that works with many Indian fashion designers, believes that for the first time, these designers will have a fighting chance to thrive in the highly competitive global marketplace. "However, it would be a travesty if the new crypto tax regime rendered them uncompetitive with this highly regressive tax," he said.
Global crypto experts believe the government's announcement of a 1% TDS at the time of digital asset transfer will be a powerful tool for tracking transactions.
Pratik Gauri, CEO and Founder of Singapore-based 5ire, stated that using Tax Deducted at Source (TDS) was a necessary component, and that, with the growing awareness of KYC/AML and how shady segments of society frequently use crypto to launder money, TDS can provide the government with the necessary information and money to build an infrastructure for crypto monitoring for tax purposes.
"I do not believe that one per cent is prohibitively expensive. "It will also bring much-needed foreign exchange and investment to India," he said.
Changping Zhao, CEO of Binance, the world's largest crypto exchange, tweeted on Tuesday, "Crypto is legally recognised in India with a 30% tax."
However, experts argue that recognising digital assets for income tax purposes is not the same as granting legal status.
According to Charles Tan, Head of Marketing at Coin store, India is transitioning from an unregulated to a government-monitored cryptocurrency market, which will benefit all industry stakeholders.
According to the budget announcement, global crypto exchanges are also keeping a close eye on India's progress on its CBDC, which will be launched in FY 22-23.
According to Jay Hao, CEO of OKX.com, central banks around the world have already launched or are about to launch their digital currencies, and India is slightly lagging in the digital currency race, owing to regulatory hurdles and a reluctance to accept the growing popularity of digital assets/digital currency around the world. "I hope the Finance Minister's announcement regarding CBDC is implemented without further delay, as it will provide a much-needed boost to India's blockchain industry," he said.
According to Santiago Sabater, Co-founder of DeFiChain Accelerator in Germany, the announcement was a step in the right direction, and taxation security is the first step for adoption to progress. "If India can support crypto startups, create more equitable regulations, and enable collaboration with banks, it has the potential to become the world's leading crypto-hub for web 3.0," Sabater said.
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