India took a step closer to adopting cryptocurrencies after years of being hesitant about the appropriate way to treat them. The Reserve Bank of India recommended a complete ban on crypto, arguing that a partial ban will not work. For a while it wasn’t clear which way India will take regarding cryptocurrencies. Apparently, the move towards embracing crypto has become possible because the country is attempting to keep up with the global move toward the digital assets. The Reserve Bank of India is planning to launch its digital currency by the end of this year, Finance Minister Nirmala Sitharaman said in her budget speech in parliament on Tuesday. The Minister also announced a 30% tax on any income from the transfer of virtual digital assets, effectively removing uncertainties about the legal status of such transactions. Such a steep tax rate on crypto could discourage people from making crypto transactions that have been growing in volume lately in India despite the central bank’s warnings about the risks of price volatility, money laundering, trading weapons, and other risks commonly associated with crypto field. Speaking on the adoption of CBDCs, Sitharaman said that a “digital rupee” will give a big boost to the economy. The issuance of the digital rupee means that within the fiscal year April 2022 to March 2023 the Indian government will have fully formed the rules for regulating cryptocurrencies in the country. The digital rupee is expected to be secure and efficient, while the Indian Ministry of Finance is planning to carefully weigh all the associated risks anyway. What is interesting is that the Finance Minister did not use the words crypto or cryptocurrency in the budget speech. However, she resorted to the phrase “virtual digital asset”. In order to educate the lawmakers about the finer aspects of cryptocurrencies a training session will be conducted.
Another curious fact: a recent survey shows that 82% of Indians plan to invest in cryptocurrency even after the government provided more clarity surrounding the regulation of crypto assets. Moreover, 77.4% of respondents are certain that cryptocurrency to be treated as securities. Out of 1,800 respondents, 55.2% said they have invested in cryptocurrencies and will continue to do so. Regarding crypto regulation, more than 62% want the government to issue clear guidelines which means that more than a half of the existing or potential crypto users do not understand how the taxation mechanism is supposed to work. It is important to note that India is the world’s second largest internet market, which means that its developments on crypto will also have impact on the global crypto ecosystem.