Samajho's Android app | Samajho's IOS app | Youtube Channel | Telegram Channel | Instagram Channel
CRYPTO-INDIA AWAITS REFORMS
What the article is about?
- Talks about the prospects, concerns and way ahead for India’s crypto landscape amidst the recent taxation announcement.
Syllabus: GS-II GS-2: Government policies and interventions; GS-III Indian Economy
Cryptocurrency:
- Cryptocurrency (crypto) consists of a digital denomination designed to work as a medium of exchange through a distributed computer network (a blockchain) that is not reliant on any central authority such as a government or a bank for its upholding and maintenance.
Status in India:
- The recent Union Budget announced a 30% flat tax rate levied on any gains made from the transfer of virtual assets including cryptocurrencies and Non-Fungible Tokens (NFTs).
Impact:
- Sign of optimism:
- This prescient move amounts to effectively being a de facto affirmation of the role that cryptocurrency and related technologies could play in India’s financial-cum-economic system.
- Foreseeable are changes that would legitimise and formally legalise the activities of crypto start-ups and enable them to access the necessary support system which might not have been available previously.
- Will aid innovation:
- Such transformations would involve DeFi (Decentralised Finance) would drive innovation in the field of Indian DeFi; they would go a long way in assisting the building up of our crypto-financial ecosystem in the long run.
Concerns:
- The community of small and medium-sized enterprises (SMEs) and lower-end high net-worth individuals s going to find it most difficult to access the ecosystem given the substantial barriers posed by the tax rates.
- There is a fundamental lack of clarity in aspects other than taxation.
- The consolation offered by the Government in the form of the RBI’s CBDC, or Central Bank Digital Currency, will definitely help in pushing for the adoption of digital currencies, but, equally, defeats the fundamental purpose of cryptocurrency, which is decentralisation.
Way Out:
- The solution rests with systemic, real reforms.
- The obvious candidate for such reforms would be to reduce tax rates in the future.
- The need to curb speculative bubbles surfacing in relation to the currency.
- Introducing more rigorous regulations where appropriate without which crypto has the potential to become a source of illegitimate political funding or black money.
- Incorporation of insights from seasoned partners from international communities; insights and advice on the best practices associated with cryptocurrency policymaking.
