Indian cryptocurrency users are no longer sure which foot to dance to. In India, this rapidly growing market remains unregulated and opinions differ on what position to take. On the one hand, the government seems to want to pave the way for regulation. On the other hand, the Indian central bank (Reserve Bank of India, RBI) is extremely reluctant. “She is unleashed against cryptocurrencies”, regrets Ankit Majumdar, a 32-year-old investor who hopes, like many others, that the government will eventually “regulate in favor of cryptos”.
The last RBI salvo against virtual currencies dates back to mid-February. It was launched by its deputy governor, T. Rabi Shankar, during a banking conference. The latter did not hesitate to compare cryptocurrencies to a “Ponzi scheme”, a financial scam pyramid. Arguing for their banning, he said they threatened the “financial sovereignty” and that they «Mett[aient] undermine financial integrity” countries, insofar as they are not associated with cash flows.
A few days earlier, the RBI Governor himself, Shaktikanta Das, warned investors. “Private cryptocurrencies are a great threat to macroeconomic and financial stability. Investors should keep this in mind, they invest at their own risk,” he warned, emphasizing that they had no underlying value, “not even a tulip”. A reference to the “bubble” of the tulip, in the XVIIe century in the Netherlands, when merchant speculation caused one of the first stock market crashes.
“A tax is better than a ban”
These statements by RBI leaders come as the Indian government has just established a taxation framework, recognizing cryptos as assets. During the presentation of the budget to Parliament, the 1is February, Finance Minister Nirmala Sitharaman announced that the government would now tax income from cryptocurrencies and other digital assets up to 30%.
Any losses cannot be offset by other income. “The scale and frequency of these transactions have made it imperative to create a specific tax regime,” she justified in her speech to the Indian deputies. Transactions of virtual digital assets have seen phenomenal growth in India, especially among young people.
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