Progressive regulation and taxation on crypto could boost economy

Cryptocurrencies are the subject of much debate around the world, and India is no exception. As one of the countries with a large number of cryptocurrency investors, India is still figuring out how to effectively regulate and tax digital currencies. Progressive regulation and taxation are essential to support the industry and foster the potential to boost the economy.

Why gradual regulation matters
Regulation plays an important role in maintaining the stability and security of the crypto market. Clear guidelines on compliance and security give companies and individuals the confidence they need to participate in the industry. This could also lead to increased innovation and investment in industries that are major drivers of economic growth.

Appropriate taxation of cryptocurrency transactions is also important to foster growth and provide new revenue streams for governments. It can prevent illegal activities such as money laundering and tax evasion, and protect the economy from adverse effects. In addition, clear regulation promotes transparency and accountability in cryptocurrencies, paving the way for new businesses to participate.

In 2018, the Reserve Bank of India (RBI) issued a circular banning banks from dealing with individuals and companies dealing in cryptocurrencies. However, the Supreme Court of India overturned the ban in 2020, and the government has since worked on a regulatory framework to better protect the interests of the public.

Federal Budget 2021- Taxing the VDA
In the 2021 Federal Budget, the Government of India introduced a tax system for Virtual Digital Assets (VDA), applying 30% tax and 1% TDS on profits. However, India is not the first country to tax cryptocurrencies. Countries such as the UK, US, Italy, Canada and Germany have also introduced tax regimes for VDAs. The Government of India also ensures compliance with the Know Your Customer (KYC) process. We have also set guidelines for cryptocurrency advertising, including a disclaimer, to protect the public from potential risks. Despite the challenges faced by global exchanges and companies over the last year, Indian exchanges and investors have not been significantly affected by the regulatory framework and compliance measures.

What does the crypto industry expect this year?
While this was a progressive move, the industry now expects a more progressive tax regime in the next federal budget. Classifying cryptocurrencies as an asset class and excluding them from the speculative vehicle classification is what this mature asset class needs now. As an asset class, offsetting gains against incurred losses will encourage greater participation of individual and institutional investors. Also, a 1% TDS currently applies to all transactions, hindering cryptocurrency adoption. So hopefully the government will come up with a way to address these concerns. may be further discussed as part of the discussion of

Conclusion
Progressive regulation and taxation can support the growth of the crypto industry and facilitate its potential to boost the economy. We need to ensure that regulation is effective without stifling growth. The cryptocurrency industry in India and around the world is looking forward to a more progressive tax regime that will encourage participation and adoption of digital currencies.

(Author is CEO and co-founder of Mudrex, a global crypto investment platform)

(Disclaimer: Professional recommendations, suggestions, views and opinions are their own and do not represent the views of The Economic Times)