Indian crypto businesses are struggling with the new tax policies as trading volumes have dried up and many established crypto firms are looking to re
Indian crypto businesses are struggling with the new tax policies as trading volumes have dried up and many established crypto firms are looking to relocate to more crypto-friendly jurisdictions.
While many developed countries and even several of its Asian counterparts are actively studying and formulating better crypto regulations, the Indian government has maintained a “blockchain, not crypto” stance.
It might seem like the government is taking a cautionary step to focus on the underlying technology while keeping its distance from the volatile and risky crypto market. However, going by the recent policies and statements from the finance minister as well as sitting parliamentarians, the issue seems to be more of a lack of understanding.
The newly introduced crypto tax laws, for example, are highly motivated by the country’s gambling laws and were introduced and passed hurriedly without any input from the stakeholders in the ecosystem. As many crypto pundits have warned, the harsh tax policy has driven traders away from Indian exchanges.
Many ministers in the ruling government have propagated false narratives against crypto without offering any evidence to back their claims. Sushil Kumar Modi, a member of parliament from the ruling party, has compared crypto to “pure gambling” and called to “impose more tax on it so that the government can get revenue and people can be discouraged from investing in this volatile asset.”
The statement is a clear example not only of a lack of understanding but of a contradiction, in that he is talking about discouraging people from investing in crypto while believing it would bring more revenue to the government.
Sathvik Vishwanath, co-founder and CEO of Indian crypto exchange Unocoin, told Cointelegraph:
“The government continues to see crypto as a betting and gambling alternative due to which they are only ready to support its technology but not tokens on top of it.”
It is important to understand the fact that crypto and blockchain are somewhat inseparable. Crypto tokens play a pivotal role in the functioning of blockchain projects and blockchain-based rewards.
Shivam Thakral, CEO of BuyUcoin, explained that a fundamental lack of understanding is one of the key reasons for such flawed policies and advocated for dialogues with specialized groups. He told Cointelegraph:
“Any attempt to create an isolated policy by any country will defeat the whole purpose of blockchain technology, which is aimed at liberating the financial systems of the world. The Indian government must create specialized groups to discuss and debate finding a more accurate way to regulate the booming crypto sector in India. The time is right for India to take the lead and become the blockchain capital of the world.”
While many blame the government’s lack of understanding of the nascent tech to be the key reason behind its “blockchain, not crypto” stance, others feel that India’s fintech and payments network are mature enough and that a crypto layer wouldn’t really add much utility. Thus, the government is more focused on the core technology.
Trevor Goott, director of Africa and India at Unlimint — a digital financial interface provider — told Cointelegraph:
“The Indian fintech and payments sector is mature and well-serviced, and crypto would just be another layer on top, so the net benefit to India would be less when compared to another country that has a less developed payment sector. Crypto will have its place in India in the medium-term, but the short-term benefits of the other blockchain products must be realized first if a choice has to be made between crypto or blockchain.”
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Indian government sees crypto as a threat
The Indian government clearly sees crypto as a threat to its current financial system. The Indian central bank has recently warned against crypto adoption and said it could lead to the dollarization of the economy.
The Reserve Bank of India said, “Crypto will seriously undermine the RBI’s capacity to determine monetary policy and regulate the monetary system of the country.”
In the early days of crypto, most countries thought digital assets posed an inherent risk to their fiat ecosystem; however, as the industry matured, it has been proven that cryptocurrencies can co-exist with traditional financial markets.
Siddhartha, founder of Intain — a blockchain solution firm — told Cointelegraph:
“Having spoken with several people in government, they understand blockchain but are reacting in the short term to a surge of marketing dollars and campaigns that have caused a lot of noise on behalf of some crypto exchanges. These campaigns are worrisome due to the broad exposure they create among the general public. It is our view that government officials are generally supportive of blockchain that works in a manner that brings trust and transparency to the financing of non-bank…
cointelegraph.com