India is carving out its digitalisation stance with its digital rupee launch set for the coming financial year as well as a 30% tax on crypto and NFT transfers.
In Tuesday’s speech on the upcoming year’s budget, Indian finance minister Nirmala Sitharaman confirmed the launch of a central bank digital currency (CBDC) by 2023 to boost economic growth.
“Introduction of a central bank digital currency will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” she said.
The Reserve Bank of India (RBI) tested the digital rupee in controlled trials throughout much of last year, with plans for a phased national rollout soon following years of development.
Across the border, China made public a pilot version of its e-CNY – or digital yuan – app at the beginning of January. Meanwhile, in the US, the Bank of America has predicted a digital dollar rollout by 2030.
A bite of the action?
The second announcement, a substantial tax on private digital assets, stirred far more controversy.
“Any income from transfer of any virtual digital asset shall be taxed at the rate of 30%,” Sitharaman outlined.
“No deductions in respect of any expenditure or allowance shall be allowed while computing such income, except the cost of acquisition. Further, loss from transfer of digital asset cannot be set off against any other income.”
Whilst Indian crypto advocates are relieved the government has – for now – backtracked on its proposed all-out ban of private cryptocurrencies, the proposed tax still caused confusion.
Randeep Surjewala, spokesperson for the opposition Congress party, tweeted after the announcement: “Ms Finance Minister, please do tell the nation, is cryptocurrency now legal, without bringing the Cryptocurrency Bill, as you tax the cryptocurrency? What about its regulator? What about regulation of crypto exchanges? What about investor protection?”
The finance minister responded that the RBI is “collecting inputs for regulation”, but that taxation must be put in place whilst regulatory plans are discussed.
Continued uncertainty lingers over the future of India’s crypto industry, despite massive uptake amongst the population.
WazirX, an Indian exchange owned by Binance, recorded £32 billion in trading volume for 2021, a seventeen-fold increase over the previous year.
Despite the implications of the tax, WazirX CEO Nischal Shetty welcomed the news.
“[The clarity on crypto taxation] will add much needed recognition to the crypto ecosystem of India. We also hope this development removes any ambiguity for banks, and they can provide financial services to the crypto industry. Overall, it’s good news for us, and we will need to go through the detailed version of the budget to understand the finer details,” he said.
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