If you are a finance or a stock market enthusiast, chances are that you are well versed with the notion of the contentious digital asset- cryptocurrency. To state that this digital asset has taken the world by storm and has wrapped various investors around its fingers will be an understatement.
It is to be noted that the popularity of the digital asset is emphatically garnered from its unfathomable profits and worldwide popularity. In fact, Cryptocurrency has gained traction to the extent that people have been investing in it despite the fact that it can quite effectively put them on the wrong side of the law.
Finance ministry’s attitude towards the contentious digital asset
The relationship between cryptocurrency and the Indian government can be best described as aversive and highly antagonistic. The Indian government has usually tried to warn people off to invest in the currency. This, well has many reasons. First and foremost being the anonymity of character that the digital asset provides a user.
Given the character of anonymity, various cases of clandestine activities being carried out like money laundering, human trafficking have surfaced. The government’s inability to track these leads to the government’s aversive nature towards the same.
Secondly, it is to be noted that the government is usually unable to track its revenues as the market is decentralized. In the normal daily lives of many, any transaction takes at least an intermediatory like a bank for approval. But, in contrast, the crypto market is decentralized and thus no intermediaries are required for the transaction and hence the government is usually unable to gain revenue.
This in fact has led the government in 2018, to ban trading in cryptocurrency. But the rule was emphatically overturned by the supreme court. In a recent turn of events, cryptocurrency trading might soon predictably face a tax structure in India.
This has been clear due to the fact that the Ministry of Finance has reportedly formed a new committee for the same. The new committee will scrutinize and analyze if the income made by crypto-trading could be taxed or not.
It is to be noted that this announcement comes at a time when the country eagerly awaits the introduction of an official cryptocurrency bill. This will be presented in the parliament in the upcoming winter session.
Given the government had never really taken an accommodative stance for the cryptocurrency, therefore there was no structured framework or laws to regulate the same. In fact, there have been talks about the introduction of CBDC that will work as the centralized cryptocurrency regulated by the RBI. But the details of it have not been released or addressed.
The only shoot of hope for the investors has been comments by the politicians stating that the government is emphatically willing to change its stance and adopt a more accommodating demeanor. But will such a plan ever materialize, is a question of the future. For now, as trading has significantly gained momentum in India, the government is trying to set a regulated framework for the same.
According to the report by Inc42, four weeks had been granted to the formation of the new panel which was formed by the finance ministry. This effectively shows the government’s seriousness in terms of its commitment to developing a more accommodating attitude towards digital currency.
Reasons government will like cryptocurrency
The government also wants to embrace cryptocurrency due to various appreciable factors. The most prominent and promising one is that it will greatly facilitate cross-border payments and will help ease the discrepancies of keeping foreign exchange.
Talking about the working of the committee that has been set up by the finance ministry, it will be allotted some time duration to analyze various transactions. In the end, the panel will have to come to a decision if the income earned by trading in cryptocurrency should be taxed as capital gains or not.
However, the taxation analysis on cryptocurrency will call for the inclusion of provisions in the final draft of the Cryptocurrency Bill.
It is no news that the crypto space in India in recent months has expanded. In fact, if the data is to be scrutinized, in the countries like Pakistan, India, Ukraine, etc. the rate of cryptocurrency adoption has risen by a humungous 880 percent. This was greatly facilitated by the pandemic which had increased the financial education of many and had led them to invest in the same.
Given how aversive the Indian government’s stance has been on the subject, with various proposals for an outright ban, at least seven million people had invested a collective sum of over $1 billion in cryptocurrencies.
Thus, with such popularity, and amidst the growing crypto culture, the Indian finance minister Nirmala Sitharaman has been overlooking the draft formulation of the Cryptocurrency Bill.
Thus, what remains now is how will the crypto space in India change. Will it is for the better or worse, only time will tell.
Edited by Sanjana Simlai.