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Is there a future for cryptocurrency in India?
Finance Minister Nirmala Sitharaman proposed taxation on transaction of virtual digital assets like Bitcoin and Ethereum, which eventually is a cryptocurrency tax.
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Although India has not enacted an open ban on cryptocurrency like China, policymakers' actions are clearly causing the industry to die a gradual death.
In post-budget interviews, Finance Minister Nirmala Sitharaman stated that the government sees the crypto industry as a source of revenue, but it appears that there may soon be no industry left to tax.
Trading volumes plummet
When the new tax rule came into effect, trading volumes would fall by up to 50%. But what actually happened was a bloodbath. WazirX, India’s largest exchange by volume, saw its business nosedive by up to 90%.
Crypto investors are treated worse than gamblers by the oppressive tax regime. One can still make do with the 30% tax rate, but unlike gamblers, crypto traders are unable to offset losses in order to minimise their tax burden. Given the fledgling and fragile nature of the business, this is a big deterrent. Trading volumes will be further harmed by the 1% tax deducted at source (TDS) on all crypto transactions, which will drive away day traders.
Payments are a problem
It is commonly known that Indian exchanges have had difficulty finding stable payment partners (banks, payment aggregators, e-wallets). However, beginning April 1, these difficulties have grown in number.
MobiKwik, a wallet provider, stopped dealing with exchanges first. One of the main reasons most huge platforms were able to survive was because of this. The National Payments Corporation of India (NPCI), which operates the Unified Payments Interface (UPI), has also distanced itself from crypto exchanges, causing CoinSwitch Kuber and Coinbase to remove the option from their sites.
Supreme Court ruling
The crypto business is hanging on by a thread, owing to a Supreme Court order in 2020 that overruled the Reserve Bank of India's 2018 decision to prohibit banks from engaging with cryptocurrency exchanges.
Now that the government is taking its time with rules, the business may be left with no alternative but to take their case to court once more.
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