Budget 2023: FM Nirmala Sitharaman must classify cryptocurrencies as asset class rather than speculative instruments

Cryptocurrencies have been gaining momentum worldwide for the past two years, making big headlines. It is one of the debatable topics in India with the increasing number of crypto investors. India has been figuring out how to effectively regulate and tax digital currencies and promote innovation in the sector since 2021. Need for progressive regulations Regulations are crucial in ensuring stability and security in the crypto market. Clear guidelines for compliance and security provide businesses and individuals with the assurance they need to participate in the industry, which can lead to increased innovation and investment. This, in turn, can drive economic growth. Clear regulations can prevent illegal activities such as money laundering and tax evasion, protecting the economy from negative impacts. They can also promote better transparency and accountability in the crypto market, making it easier for new businesses to participate. Tax on VDAs The Union Budget of India in 2022 has introduced a system of taxation on virtual digital assets (VDAs) with a 30 percent tax on gains and 1 percent on Tax Deducted at Source (TDS). However, India is not alone in this. Several countries, such as the United States, the United Kingdom, Italy, Canada, and Germany, have also implemented similar taxation systems. In addition to the taxation system, the Indian government has also implemented compliance measures for Know Your Customer (KYC) processes. It has also established guidelines for advertising virtual currencies with disclaimers to safeguard the public from potential risks. Despite the challenges faced by global exchanges and companies in the last year, Indian exchanges and investors have not been significantly impacted, thanks to the regulatory framework and compliance measures already in place, which was one of the factors which played a prominent role in countering it. Need for a progressive approach to taxation The crypto industry is looking for the government to take a more progressive approach in the upcoming Union Budget when it comes to taxation. One of the key things they are hoping for is the classification of cryptocurrencies as an asset class rather than as speculative instruments. This would be an essential step in the crypto industry’s maturity and encourage more participation from retail and institutional investors. As an asset class, investors would be able to offset gains against losses incurred, which would make it more attractive for them to invest in crypto. Additionally, the current 1 percent TDS on every transaction can deter the adoption of cryptocurrencies. The industry is hoping that the government will find a way to reduce or eliminate this tax to encourage more people to use digital currencies. The Union Budget is an important indication of the regulatory stance that India plans to adopt when it comes to crypto. The industry is closely watching the Budget for any announcements or changes affecting the crypto sector. Cryptocurrency Bill still under review The Indian government’s Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, is still under review and may take some time before it is open for public consultation. Despite this, the government has already taken steps towards regulating virtual assets by introducing taxation on them in the Union Budget 2022. The introduction of this bill is considered a significant step in regulating cryptocurrency in India. It would also bring in a lot of clarity for the individuals as well as for the businesses. Regulations and taxation designed to foster growth can help promote the cryptocurrency industry’s potential to drive economic development. Governments must find a balance between promoting innovation and protecting consumers by ensuring that regulations are effective without hindering the expansion of the industry. The cryptocurrency industry, both in India and globally, is eagerly awaiting a more forward-thinking system of taxation that will encourage greater participation and the use of digital currencies. The writer is the CEO and Co-founder of Mudrex, a global crypto-investing platform. He tweets @Dul_dul @officialmudrex Views expressed are personal Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook , Twitter and Instagram .