The Indian government has announced plans to introduce a new state-backed cryptocurrency, the Digital Rupee. This move is seen as an attempt to stem the outflow of money from India due to crypto trade. The Indian government taxes crypto profits at 30%.
Many traders are now opting for other locations that allow for faster transactions and lower taxes like Malta, Gibraltar, Cayman Islands, Mauritius, Hong Kong, Singapore.
The Indian government is counting on this new digital currency to increase the ease of international payments and cut down on tax evasion. However will it be enough? Will it be able to compete with other countries? What do you think?
The government announced Tuesday it would introduce a state-backed “digital rupee” and tax virtual currency profits at 30 percent.
In a blow to one of the world’s fastest-growing cryptocurrency markets, the plans would regulate one of the world’s fastest-growing markets despite flourishing local trading platforms and glitzy celebrity endorsements.
Following China’s outlawing of all cryptocurrency transactions last September, India becomes the latest emerging economy to rein in the sector.
Financial minister Nirmala Sitharaman told parliament that virtual assets transactions have increased phenomenally. According to her, the growth necessitates a proper tax framework.
Cryptocurrency gains and other digital assets will be taxed at 30 percent starting in April, while digital losses won’t be offset against other income.
All digital assets transactions, including cryptocurrency and NFT, will be subject to one percent tax at the point of sale, a move the finance minister said would help the government track each trade.
The central bank will also introduce a “digital rupee” based on blockchain technology by March 2023, Sitharaman said.
“The introduction of central bank digital currency will significantly boost the digital economy. “Digital currency will also make currency management more efficient and cheaper,” she added.
A surge in fraudulent transactions eventually led to a central bank ban on cryptocurrency transactions in India in 2018. Cryptocurrencies have been scrutinized by regulators since they entered the market nearly a decade ago.
According to research by Chainalysis, the Indian market grew by nearly 650 percent in the year to June 2021, second only to Vietnam after India’s Supreme Court lifted the restrictions two years ago.
India’s Prime Minister warned last year that Bitcoin posed a danger to younger generations and could “spoil our youth” if it fell into the wrong hands.
Last year, the government proposed banning “all private cryptocurrencies”, but ultimately chose not to do so.
“It’s good to finally have some clarity on the taxation aspect,” said Sathvik Vishwanath, the co-founder of Unocoin, one of India’s oldest crypto trading platforms.
“If they are introducing taxation, it must be because they know that the ban (on trading cryptocurrencies) cannot be enforced.”
The Ways Crypto Will Change The Indian Economy In The Next Decade
In addition to ramping up infrastructure spending, Tuesday’s budget announced plans to combat rising inflation and unemployment as well as support the economy’s post-pandemic recovery.
7.50 trillion rupees ($100 billion) will be spent on roads, railways, defence, housing, and energy in the upcoming fiscal year, as the government prepares for key state polls in the coming weeks.
“Infrastructure, investments, growth, and job creation are available in this budget,” Modi said.
According to estimates released Monday, India’s economy will grow at a world-beating rate of 8.5 percent during the coming financial year.
Rudra Sensarma, an economics professor at the Indian Institute of Management Kozhikode, noted that the budget was short on big-bang proposals but struck a balance between recovery and improving the country’s fiscal position.
Yet India is still running a large budget deficit, which is projected to drop to 6.4 percent of GDP by 2022-23.
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Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
