After much controversy over whether the government was going to ban private cryptocurrency, Finance Minister Nirmala Sitharaman announced on Tuesday that India will soon get a new cryptocurrency that will be launched by the RBI. The government also announced a 30% ‘crypto tax’ on any income from transfer of virtual digital assets.
“Introduction of a central bank digital currency will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system. It is therefore proposed to introduce a digital rupee using blockchain and other technologies, to be issued by the Reserve Bank of India, starting 2022-23,” the finance minister said. “Any income from virtual digital assets is taxable at 30%. There will be no deduction with exception of the cost of acquisition. The TDS is applicable beyond a specified monetary threshold, and the gift of virtual currencies is taxable in the hands of the recipient,” she added.
The move was welcomed by the cryptocurrency industry leaders and investors in India, who say the move legitimizes the industry.
The move to implement a crypto tax and RBI’s own digital money is seen as an attempt by the government to reign in the NFTs and cryptocurrency, and bring them under the taxation framework and comes in the backdrop of an earlier attempt by the government, in November, to ban all private cryptocurrencies.
The proposed law, reports had said, would ban the use of cryptocurrency as a mode of payment in the country, with those violating the law facing non-bailable arrest without warrant. But later, a cabinet note circulated by the government revealed that the government decided to regulate the cryptocurrency space rather than banning it entirely.
Remember that the RBI had been opposed to cryptocurrency earlier, expressing concerns over the likely threat it can pose to macroeconomic and financial stability of the country. But in March 2020, the Supreme Court overturned a ban imposed by the Reserve Bank of India (RBI) on cryptocurrency payments.
The government has also in the past raised concerns over cryptocurrencies, with the PM warning that it could ‘spoil our youth’. There are concerns that unregulated cryptocurrency space could be used for money laundering and organized crime.
While there are no official figures, India is one of the biggest markets for cryptocurrency in Asia and between 15 and 20 million people in India are estimated to own cryptocurrencies, with holdings totaling approximately $6 billion (€5.31 billion).