More than 15 million Indian investors have an exposure to cryptocurrencies today. This figure has grown 7-8x in 2021 and is set to grow multi-fold this year as well. As this asset class permeates the wider community, the need for a standardized understanding of regulations and taxation is growing. The upcoming Budget session of the Parliament is a good opportunity to start a dialogue around various undefined aspects of the asset class that need addressing.
Here is what we are looking forward to:
Tax implications on businesses and investors
Crypto-based businesses including exchanges have been self-compliant and adhering to all the relevant laws in the country. They have helped grow this ecosystem with respect to consumer education as well as have become the de facto gatekeepers of authentic services in the country. Lack of clarity on taxation, however, has made some of the businesses registering themselves abroad, leading to a drain of capital and innovation which could be easily be reversed. Clarity on regulations will also boost investment in businesses in the sector which will drive the next wave of job creation in the country.
For investors, questions on crypto taxes have no standard answers in the industry today. Opinions of tax consultants are also currently subjective. Clarity on taxation will help investors to park capital with confidence and to estimate implications of every transaction they undertake that year. A forward-looking tax regime – that encourages responsible investing in the asset class – will allow for innovations in the sector and likely boost the economy with respect to tax collections.
Regulatory framework needed
Crypto can be a complex world for new investors. New investors would need guidance and education with respect to functionalities, operations and the risks involved. This can be achieved when conversations around Bitcoin and other cryptocurrencies grow amongst the public. A regulatory framework will enable such conversations in mass media.
Mass adoption will also necessitate simplified technological offerings. India-based crypto platforms and products would need to evolve – this requires investments in the sector which will proliferate once regulations are defined.
Ecosystem will get clarity and purpose
Regulation helps in setting standards with respect to education, compliance, KYC, consumer protection as well as insurance. Overseen by a body that has regulated traditional finance, the framework will provide authenticity to institutions (such as crypto exchanges and platforms) and make it easier for new investors to adopt their services.
Such a framework will also weed out actors with dubious intentions from the industry and possibly eliminate scams.
India will lead global innovation with localized crypto services
The crypto asset class is likely to evolve and represent a full suite of financial products for investors globally. India has potential to become the leader among services in the developing world. For example, investors who love to invest in mutual funds will be served with crypto equivalents that are defined for the Indian audience and regulated locally. They will be backed by registered crypto wealth advisors who will make investing in crypto a convenient experience. Such services can mushroom once regulations allow for them.
The year 2022 can be a great year for the crypto industry in India. The ecosystem hopes that regulations will bring clarity and confidence at the earliest.
The writer is CEO & co-Founder, Giottus Crypto Exchange. Views are personal