Notes

India Decides To Allow Cryptocurrencies - But Imposes Massive Taxes On Them

India will not ban cryptocurrencies but will impose a heavy tax of 30% on income from them.



This announcement was made as part of India's federal budget presentation. It placed earnings from cryptocurrencies (NFTs), and other non-fungible tokens in India's highest tax band.



Also, losses resulting from crypto sales can't be offset against income other than crypto, potentially dissuading trading and investment into digital assets.



While this looks like bad news for crypto investors in the country, experts hope that the establishment of a formal tax framework means that the government had is warming up to the idea of digital currencies, reassuring corporates to enter the market.



'We also hope this development removes any ambiguity for banks and they can provide financial services to the crypto industry,' Nischal Shetty, CEO of WazirX, a virtual currency exchange, told Reuters.



The Indian government was notorious for taking extreme measures against crypto, even banning it once. Indian crypto community is happy to see the regulation.



New investors will not be attracted to the idea of paying more that 30% in taxes and other charges on crypto profits.



India's central banking has expressed serious concerns about private cryptocurrency, fearing that they could lead to financial instability. As a consequence, many banks cut all ties with crypto companies.



India's Finance minister Nirmala Sitaraman, in a dramatic change of heart, stated that the central banks will introduce a digital money in the next financial years using blockchain technology and other supporting technology.



'The introduction of a central bank digital currency will give a big boost to the digital economy. Sitharaman stated that digital currency will allow for a more efficient and cost-effective currency management system.



India's Finance secretary later confirmed that cryptocurrencies, such as Bitcoin or Ethereum, will not become legal tender. This means they cannot be used to pay taxes. Instead, users can use the digital rupee issued to them by the central bank to buy non-digital assets.



Industry estimates suggest there are 15 million to 20 million crypto investors in India, with total crypto holdings of around 400 billion rupees (PS3.96 billion). crypto-explorer The Indian crypto market is not yet known in full.


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