Initially, the Reserve Bank of India warned the public about the risks associated with cryptocurrencies. It appeared to be clear that the government did not approve of the crypto market. India is not the first country to issue a warning about cryptocurrencies. Canada, China, and Russia have all done the same.
The RBI urged people not to buy or sell cryptocurrencies, including bitcoins. Additionally, they advised those who already owned them to be aware of their risks and only invest at their own risk.
The cryptocurrency community concluded that this new warning was not as harsh as it could have been. The RBI said that they were not banning cryptocurrencies themselves, but merely advising people not to trade in them because they are risky investments.
An Unexpected Change in Attitude
Things have changed considerably since then. While India has been slow to adopt cryptocurrency regulations, it may now be taking concrete steps to acknowledge crypto’s importance to the financial infrastructure of the country.
Instead of trying to ban it as an illegal form of currency, the government appeared focused on trying to control it.
The Indian government is considering establishing a regulatory framework for the crypto market. An unnamed senior government official is cited as the source in a recent Reuters news report.
The proposal would create an environment of safety and certainty for investors, while also ensuring that cryptocurrencies are not used to fund illegal activities.
While the Indian government has been slow to acknowledge crypto’s presence in India, this news brief suggests that they may be ready to act soon.
The Budget Speech that Shocked Investors
Investors in India were bewildered on Feb. 1, 2022, when Nirmala Sitharaman, India’s finance minister, signaled a change in attitude. Crypto businesses and banks alike scrambled to figure out what impact the government’s decision would have on them.
Apparently, it was now fine to purchase crypto on apps like OKX and investors didn’t have to feel guilty about it or worry if they might get in any legal trouble.
In her budget speech, she made two major crypto-related announcements. Firstly, the crypto community was surprised to hear that the government is considering regulating cryptocurrency exchanges. Secondly, the government intended to tax cryptocurrency transactions as well as the sources of cryptocurrency businesses. The Indian government plans to tax crypto transaction income at 30% and all other transactions at 1%.
Few countries have introduced digital currencies that are not tied to the country’s fiat currency in the past. In contrast, the Indian government is now planning to create its own digital rupee as a central bank digital currency (CBDC).
To sum up, India has been experiencing a crypto boom over the last few years. The country is experiencing confusion because of recent crypto tax announcements. People are trying to work out how they can be taxed while at the same time discouraged from using crypto.
In India, the government’s position appears to be that cryptocurrency is not an alternative type of legal tender, but it can be treated as an asset. This is where things stand now. Hopefully, parliamentary deliberations and new legislation in the future will clarify things a bit more.