Crypto markets rebound, but future of assets in India uncertain: Experts
The market capitalization (m-cap) of cryptocurrencies topped $1 trillion on Wednesday, capping a week-long bull run that in India experts warned about the future of the digital assets.
Bitcoin, the largest cryptocurrency by m-cap, approached $23,500 after rising nearly 20 percent in the past seven days, according to coinmarketcap.com. Ethereum, the second largest cryptocurrency, traded above $1,500, up nearly 45 percent in a week.
The m-cap for all cryptocurrencies was over $1.05 trillion, according to coinmarketcap at 3 PM IST.
“Bitcoin’s price rise has ignited some bullish sentiments among investors. It reinforces the commitment to the fundamentals of Bitcoin. However, we have also witnessed Bitcoin’s fall to the lows, so we have to wait and see the global market movements to better understand the market changes,” said Mridul Gupta, COO at CoinDCX.
Sridhar R, partner at Grant Thornton Bharat, said India’s legislation in April managed to tax digital assets. “With the government implementing the withholding tax and income tax provisions as recommended in the Finance Bill of 2022, the crypto market in India is poised to comply with these stringent tax regulations. While these impose difficult withholding tax compliance on the market players and platforms, they clear the air under the Income Tax Act, to some extent degree”, he said.
From 1 April, a 30 percent tax was imposed on income from the sale of crypto assets. From 1 July, an additional 1 per cent tax was imposed in the form of withholding tax (TDS).
Finance Minister Nirmala Sitharaman said in a written reply to Parliament on Tuesday that the Reserve Bank of India is of the view that cryptocurrencies should be “banned”. She called for international cooperation to regulate the assets.
In India, cryptocurrencies may rise on the expectation that they will be brought under the goods and services tax (GST), Sridhar said.
“If this proposal [GST on cryptocurrencies] is accepted, then India is poised to be a prohibitively high tax jurisdiction for crypto players and the market in general. The current buzz is perhaps in anticipation of the GST proposal, with people trying to settle their positions urgently”, he said.
“If the GST proposal is accepted as is, or not diluted to a lower rate of 12 percent to 18 percent, the crypto market in India is likely to erupt in the coming days. There is also a real concern about cross-border settlement of these the instruments under provisions of Indian Exchange Control Act with enforcement agencies also beginning to investigate such transactions. This is also likely to further reduce interest in such assets.”
Vaibhav Gupta, founder of MyDesiCrypto, a marketing platform, was optimistic that India would allow space for cryptocurrencies. “Cryptocurrency/Blockchain industry is one of the most important opportunities for young Indian audience, not only because of the risk-reward theory, but because of the huge opportunities. One cannot ignore its importance and thus lose ground to other countries,” he said.
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