With the Union government’s latest decision to levy 30% tax on income from crypto and virtual digital assets, it is expected that the move will pave the way for its wider adoption in India. In the Budget 2022, finance minister Nirmala Sitharaman has announced to levy a 30% tax on income from crypto and other virtual digital assets.
According to Nischal Shetty, founder and CEO, WazirX, Bitcoin is emerging as a store of value with popular financial institutions, tech giants etc. adding it to their treasury globally. “Its value derives from the tech and not out of thin air. Crypto is slowly emerging as an alternative asset class among millennials. The fact that it is backed by an innovative technology that is decentralised in nature makes it very appealing. Youth favours BTC over traditional investment and WazirX has a huge young user base,” says Shetty.
Besides tax on income from digital assets, the finance minister has also proposed to introduce digital rupee, using block chain and other technologies in the Budget 2022. The digital rupee will be issued by the Reserve Bank of India (RBI) starting financial year 2022-23 for more efficient and cheaper currency management system.
Will increase participation
“This taxation clarity will enable masses and corporates who have been waiting out due to uncertainties to now participate in crypto. It will also motivate more people to enter and build in the crypto space and expand our ecosystem,” says Shetty.
Impact on existing market
On how introduction of digital coin by Centre will impact existing crypto currency market in the country, Shetty says that this move will pave the way for crypto adoption and put India in the front seat of innovation. “The development of central bank digital currency (CBDCs) will also lead to greater innovations which will empower faster business operations globally. It will reduce the cost of providing financial services, and be one of the largest crypto user on boarding events in the world,” explains Shetty.
Difference between CBDCs and crypto
CBDCs are digitized rupee, whereas crypto assets like Bitcoin and Ethereum have their own use. “People use Bitcoin as a store of value, and Ethereum’s smart contracts to create decentralized applications (DApps). While a CBDC would be helpful, it solves different problems compared to what existing crypto assets solve. Every block chain needs its own native token to operate, to maintain the sanctity of the ecosystem,” he says.