In November 2021, a bill was proposed in the lower house of the Indian parliament to ban cryptocurrencies. This bill demonstrated in particular the country’s interest in the development of a central bank digital currency (MNBC) as an alternative to more common cryptocurrencies. On January 31, 2022, Nirmala Sitharaman, Minister of Finance of India finally announced several measures to try to regulate the cryptocurrency sector in the country which include the creation of this MNBC.
A 30% tax, tax deduction at source, and creation of an MNBC
On January 31, the Minister of Finance declared that income from the transfer of virtual digital assets such as cryptocurrencies or NFTs will be taxed at 30%. In parallel with this announcement, it also proposes a tax deduction at source on payments made in connection with the purchase of virtual assets. The objective is to obtain the details of all of these transactions. Despite the weak regulation of the sector in the country before these announcements, the purchase of cryptocurrencies and NFTs is progressing rapidly in India.
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Indian cryptocurrency exchange WazirX, said last month that its annual trading volume exceeded $43 billion, a growth of 1,735% compared to 2020. The scale and frequency of these transactions have made it imperative to provide for a specific tax regime,” said Nirmala Sitharaman.
Crypto is legally recognized in India, with a 30% tax.
— CZ ? Binance (@cz_binance) February 1, 2022
India’s central bank will also introduce a digital currency, known as the digital rupee. For several months, she has been trying to examine the impact that the digital rupee could have on the country’s banking and monetary systems while increasing consultations with specialists. ” The introduction of a central bank digital currency will give a big boost to India’s digital economy. Digital currency will also lead to a more efficient and cheaper currency management system Nirmala Sitharaman said.
Announcements on cryptocurrencies and NFTs that are not unanimous in India
Despite these announcements allowing India to recognize cryptocurrencies, many entrepreneurs, investors and individuals are skeptical about how India plans to regulate the cryptocurrency market. Spokesperson for the main opposition party, Randeep Singh Surjewala was not shy about expressing his dissatisfaction with the lack of a regulator, regulation on cryptocurrency exchanges and investor protection.
And Ms. Finance Minister, pl do tell the Nation –
Is Crypto Currency now legal, without bringing the Crypto Currency Bill, as you tax the crypto currency?
• What about its regulator?
• What about regulation of Crypto Exchanges?
• What about investor protection?#Budget2022— Randeep Singh Surjewala (@rssurjewala) February 1, 2022
India is far from being the first country to have tried to regulate cryptocurrencies in order to make them legal. It joins South Korea, or Ukraine. On the other hand, we find China, whose central bank has decided to ban all activity related to cryptocurrencies. More recently, Russia was about to make the same decision, but Vladimir Putin ignored the recommendations made by the Russian central bank which advocated banning cryptocurrencies, not wanting to waste an opportunity to revive the country’s economy.