2018 had been the year for the official crypto ban in India, a country with a huge population and a diverse and growing economy that saw digital currencies as a possible threat to its economy.
India: doubts arise toward cryptocurrencies
This destabilizing sentiment had led the Indian Central Bank to draft a circular that banned crypto in the country only to be followed by a resounding U-turn years later.
In fact, in 2020 the Supreme Court had proceeded to strike down the RBI (Indian Central Bank) circular that banned the use of these currencies.
Now the issue seems to have taken a further turn, the government is pondering what to do and confronted with the fact that cryptocurrencies are an opportunity rather than a threat and in that sense they are calling for globally coordinated regulation having become the phenomenon of apical dimensions.
International arbitration prior to ad hoc country-level regulation is the path the government is hoping for.
India’s Finance Minister Nirmala Sitharaman, stated that the Central Bank is concerned about
“the destabilizing effect of cryptocurrencies on a country’s monetary and fiscal stability. I recommend framing legislation in this area. Furthermore, the value of fiat currencies is anchored in monetary policy and their fiat status, however, the value of fiat currencies. cryptocurrency is based solely on speculation and high yield expectations that are not well anchored”.
India also seems to converge on the Russian approach and confirms itself after China as another of the BRICS countries critical of the asset of digital currencies but also of NFTs and products such as themed ETFs.
“… any regulatory or prohibition legislation can only be effective after significant international collaboration on the assessment of risks and benefits and on the evolution of taxonomy and common standards”,
adds Finance Minister Nirmala Sitharaman.
In addition, the current taxation of cryptocurrencies in India does not place the country among the small group of attractive ones going so far as to tax assets by 30%.
This may not end there, and taxes could be raised in late July when a panel that includes federal and finance ministers will be asked to decide whether to raise them.
The increase under discussion is an additional 28% which will be on top of the taxation already in place in the country.
Coinbase and FTX are considering following the direction taken by the Indian government to exit the country’s market.
The possible new taxation, as well as the previous one, affects only profits and not deposits but still has a burden that is difficult to bear by investors who are considering the state to be less and less crypto-friendly.
In this regard, a plan by the RBI on India’s state digital currency, its own Central Bank Digital Currency (CBDC), is on the agenda.