India Takes Steps to Tax Cryptocurrency and Create its Own
The Indian government said Tuesday that it would tax cryptocurrency income, making India the latest major nation to move in that direction.
At the same time, the country will launch its own blockchain-based currency controlled by the Indian central bank before April 2023, Finance Minister Nirmala Sitharaman said Tuesday. She didn’t offer any further information.
Sitharaman’s two-pronged statement has settled one of Asia’s largest economies’ many unanswered questions for months.The Indian government has been hostile to cryptocurrencies since their inception. In November, Prime Minister Narendra Modi had criticized digital currencies, and his administration suggested that non-government controlled cryptocurrencies should be completely banned.
Now, India has joined the ranks of other countries including the United States, Germany, and a slew of others that have given their people permission to trade cryptocurrencies such as Bitcoin, which has enthralled young Indians.It will also become one of the few countries to test its own digital currency, joining China as a pioneer.
India’s largest cryptocurrency trading platform, Mumbai-based WazirX, has 10 million users and trades $43 billion worth of cryptocurrency.
Vijay Sitharaman, the new finance minister of India, said on Tuesday that “the scale and frequency of these transactions have necessitated” the Indian government to start charging taxes.”
“There has been a dramatic rise in virtual digital asset transactions,” she continued.
The growing appeal of crypto trading in India, especially among young people, has worried senior figures, including Modi, who warned in several public addresses last year that cryptocurrencies might help money laundering and terrorism financing. He stated to a think tank that wild trading may “spoil our children.”
In November, the Indian government put forth a bill that sought to ban citizens from trading cryptocurrencies, which caused cryptocurrency prices to plummet. After lawmakers and regulators pointed out that the issue was still under study.
Despite its ambivalence toward cryptocurrency, the Modi administration, which has frequently marketed itself as tech-savvy, has expressed interest in getting rid of paper money entirely and utilizing blockchain technology.
The Indian government eliminated a large portion of the paper currency in circulation in 2016 to combat corruption, but the move sparked substantial economic upheaval and a slew of complaints. Since then, the Modi administration has pushed digital payments while considering a national digital currency that could be closely regulated. Last year, a senior Reserve Bank of India official criticized the Indian government for not developing a digital version of the rupee to combat the popularity of bitcoin and other openly traded, hard-to-track cryptocurrencies.
The digital rupee, according to Sitharaman, would be controlled and issued by the Reserve Bank of India, making it distinct from decentralized cryptocurrencies like bitcoin. “The introduction of central bank digital currency will have a significant impact on the digital economy,” Sitharaman said. “Digital currency will also provide a more cost-effective and efficient money management system.”
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