Nirmala Sitharaman, the Union finance minister, said on April 1 that the government would keep its promises on issues such as bank privatization and cryptocurrency regulation, but she did not explain.
Despite several series of announcements, the government has not kept its promise to privatize the banks. Faced with union resistance, the administration is reluctant to go ahead with the privatization plan. Similarly, cryptography rules have not yet been established at the national level.
The Minister of Finance stated in the Union Budget 2022 that all income from the transfer of virtual digital assets will be taxed at 30%, citing the huge development in the use of virtual digital assets and the need to place in a dedicated tax framework.
However, the Center has been evasive on the Crypto bill so far.
During the last parliamentary session, there was a lot of discussion regarding crypto taxes. Apart from taxation, the Ministry of Finance did not propose any concrete regulations during the session.
In the past, currencies were created to replace the barter system. Because they are not backed by any currency or commodity, we call the currencies we use every day “fiat currencies”. The currency we use is a government-issued promissory note that promises to pay the bearer the amount mentioned on the currency.
The bill can ideally serve to create a level of uniformity of knowledge and bring the many government entities involved on the same page, while ensuring safety and assisting in the regulation and prevention of misuse of otherwise unregulated markets.
At first glance, however, the bill appears to be quite narrow, as it wants to ban all private cryptocurrencies, including mining and trading. The bill also aims to promote the “official digital currency”, which would be issued by the RBI and the central government. Moreover, compared to similar economic crimes, the penalties under the bill seem unnecessarily punitive. The content of the bill has not yet been made public, so it could be significantly changed from the terms of the previous Cryptocurrency Prohibition and Official Digital Currency Regulation Bill, 2019.
Crypto trading platforms in India are experiencing a significant increase in volume. According to a recent report10, WazirX, India’s largest cryptocurrency exchange, processed over $43 billion in annual trade. The government can tax the income generated if properly regulated, which can be a win-win situation for both the government and the investors.
Although there are legitimate concerns about the use of VCs, regulation rather than prohibition may be a more viable choice in India, and the acceptance of VCs may have helped India become a future leader.