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Thursday, May 26, 2022
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Classify Cryptocurrency As Asset: Industry’s Pre-Budget Expectation

As the cryptocurrency market continues to grow, industry experts feel the upcoming Budget should bring in regulations and clarity on at least the taxation of cryptocurrencies.

Classify Cryptocurrency As Asset: Industry’s Pre-Budget Expectation
Cryptocurrency income tax calculation concept.
Classify Cryptocurrency As Asset: Industry’s Pre-Budget Expectation
outlookindia.com
2022-01-18T08:29:28+05:30

According to a recent report by NASSCOM and WazirX, the cryptocurrencies market is likely to account for $15.6 billion in investments by 2030. Cryptocurrencies hold the promise of solving some challenges such as health and safety, digital identity, trade, finance and remittances. Bitcoin, DeFi, crypto capital and Central Bank Digital Currency (CBDC) are driving the growth of the cryptocurrencies market, according to the report. Over the last one year, the decentralised finance market has registered a jump of 100x, and lending on DeFi platforms has increased by over 650 per cent. Bitcoin has emerged as the fastest asset to reach a market cap of $1 trillion, surpassing gold and US dollar, according to the report.

However, this nascent market is still not under a proper regulator who would govern it. Hence, there are ambiguities and lack of trust when it comes to classifying crypto as an asset class. Therefore, in their budget expectations for cryptocurrencies, most industry players want better clarity from the government on crypto taxation.

Taxation Of Crypto As An Asset

Nischal Shetty, CEO of WazirX, said that besides regulatory clarity, there is need for clarity on crypto taxation. “Regulatory clarity will give the crypto sector a boost, accelerate its growth and potential to contribute to our $5-trillion economy vision. We expect the Union Budget to present fine-tuned clarity on the crypto landscape,” says Shetty.

While legal implementation with regard to cryptocurrencies still seems a while away, any initiative announced in the Budget would at least open a direct line of conversation on crypto classification as an asset class, its taxation policies and the blue-ocean opportunities available in this globally emergent segment. “This would not only encourage institutional investments in the space but also open up job opportunities in the underserved markets,” adds Shetty.

However, industry experts think the government will not levy any specific taxation over cryptocurrencies in this budget session. “The existing laws, although difficult to apply on crypto, do allow for proper tax collection on crypto profits and the onus of paying that lies with the user making the profits. Defining tax on crypto would require an elaborate methodology, segregating different types of transactions. I strongly believe that the government will introduce the tax regime for crypto whenever they introduce a regulation Bill for crypto. Until that time, they wouldn’t want to break what is working by introducing new codes,” says Naimish Sanghvi, CEO, Coin Crunch India.

GST On Crypto Exchanges

Industry experts also want the government to introduce GST on crypto exchanges. “We expect the government to introduce GST on crypto exchanges just (as there is for) discount brokers. On an individual front, we expect the government to officially recognise trading income from crypto (and taxed) the way stock trading gains are taxed in India. The government has already shown positive intent towards taxation on crypto. In this budget session, the same might be introduced,” says Bandhul Bansal, Founder, Finstreet.

Overall, the industry is upbeat about the nascent cryptocurrencies and blockchain technology. They feel that new regulations would eventually pave the way for further growth of this industry and drive confidence in the ecosystem as businesses and individuals would be able to operate properly with more clarity on taxation and cryptocurrencies being defined under the Indian taxation laws as an asset class. They feel the new regulations should be progressive so that they set a precedence for the entire world.

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