By Mohammed Roshan
India’s government has refrained from taking a clear position on crypto in recent times
There have been reports and statements that the Indian government has been working on a crypto policy since 2019. However, nothing has been finalized yet. The most recent statement from the Indian Finance Minister Nirmala Sitharaman said that the government plans to discuss crypto regulations with the G20 members, to see how best it can be done.
Looking back at the past, the journey of crypto in India has been a rocky one – filled with its fair share of ups and downs. It was in December 2013 that the RBI came out with its very first official statement cautioning citizens to stay away from the crypto space.
Eventually, we saw crypto being banned in the country from 2018 all the way up until March 2020 – when the Supreme Court reversed this decision – and it has been quite a rollercoaster ride for Indian crypto users and the industry as a whole.
What has been most fascinating is the growth that the crypto space has had over these past few years in India, in spite of the regulatory uncertainty. From being treated with skepticism and fear in the initial days, we have come a long way to today where Bitcoin and crypto are familiar terms and discussed in offices and families.
During the last bull run, there were even ads of popular exchanges running across all of our television (and mobile) screens.
From the perspective of the regulators, the reason for this untoward negativity could be perhaps because they considered this space to be a bubble that would eventually die, and hence regulations weren’t really necessary.
However, as crypto adoption continued to rise – government officials have realised that crypto is here to stay. Hence, now it has led to a choice that has to be made. One, the right regulations could be introduced to aid the growth of the industry and plant seeds for India to be leading this space. The other option would be to sit back and wait for more clarity.
The Reserve Bank of India (RBI), has long recommended a complete ban on all crypto, warning that it has the potential to destabilize the country’s monetary and fiscal stability. RBI Governor Shaktikanta Das recently said the next financial crisis will come from crypto if they are not prohibited.
Despite having no regulatory framework for crypto, the Indian government had introduced a new tax regime last year, taxing crypto income at 30% and a 1% tax deducted at source (TDS) on crypto transactions.
New reports suggest that India’s tax rules on crypto, which went into effect last April, has resulted in local exchanges ceding the lion’s share of the market to those operated by foreign players.
We must also understand that while working in a complex, multi-stakeholder environment, it is not a straightforward task for the Indian government to bring out regulations. Rushing regulations could also be counter-productive, as it could do more harm than good for the industry.
At the same time, it might not do well to stay still as the crypto space is growing rapidly with many innovations coming out every few months.
India also has a great developer talent pool and the right regulations would help us become a global crypto hub and a role model to other nations. With the right regulations, it does look to be a bright future for the Indian crypto ecosystem. We have already seen the rise of several interesting projects and innovation from the Indian crypto ecosystem, and this trend would only be expected to continue.
Looking ahead, India’s budget for the 2023-2024 fiscal year comes out on February 1. The industry is hopeful that the country could unveil new crypto-related tax rules that may be aligned with the G-20, and lay the groundwork for growth of the crypto industry in India.
The author is co-founder and CEO, GoSats