As a controversial 30% tax on cryptocurrencies goes into effect this Friday, the Indian government appears to be delaying the introduction before Parliament of laws that will properly regulate digital assets.
In fact, according to a Bloomberg report, the government has no plans to legally regulate cryptocurrencies until there is a global consensus on the form and structure of the laws provided for that purpose.
However, Indian lawmakers have compared profits on cryptocurrency exchange to horse racing or lotteries, so they have set the highest tax rate in that country for both digital assets and gambling activities. In addition to the 30% on the profit, they set up a deducted tax of 1% for each transaction.
The Bloomberg report states that the authorities have opted for a “wait and see” policy on the results of cryptocurrency regulations set by other countries.
What’s Behind the Cryptocurrency Controversy in India?
Meanwhile, the Indian parliament is hotly debating crypto-assets. While some parliamentarians argue about the government’s inability to understand the workings of cryptocurrencies and the evolution of digital finance, others suggest increasing the tax on digital assets up to 50 %.
The issue of cryptocurrencies in India has been controversial for years. While the Reserve Bank of India (RBI) attempted to ban banks from allowing crypto asset-denominated transactions in 2019, the Supreme Court struck down its claim in March 2020.
According to Bloomberg, the Indian cryptocurrency market grew by 641% between July 2020 and June 2021.
In January this year, Indian Prime Minister Narendra Modi told the World Economic Forum that any action a country wants to take on cryptocurrencies will be “insufficient” given the emergence of new challenges as the technology develops.
A month later, RBI executive director Shri T Rabi Sankar said that “cryptocurrencies are not currencies, or financial assets or real assets or even digital assets,” and therefore “cannot be regulated by any financial sector regulator.”
However, the Central Bank of India is preparing to develop its own digital asset, CBDC, which is set to launch by the end of 2022.