BT Brainstorm: Crypto taxation won’t lead to outcome govt expects, say experts

BT Brainstorm: Crypto taxation won’t lead to outcome govt expects, say experts

Industry experts are of the opinion that there are bigger questions that need to be asked regarding the whole issue of cryptocurrency in the country.

Budget 2022 saw Finance Minister Nirmala Sitharaman announce a 30 per cent tax on all digital assets that includes cryptocurrency and non-fungible tokens (NFTs). Many industry players saw this as the first step towards the regularisation of cryptocurrency in the country, but that’s not exactly the truth. While it did mean that cryptocurrencies were not going to be banned in India and they were not “illegal”, crypto experts and policy makers believe that there’s a long way to go.

L Bardi Narayan, Executive Partner, Laxmikumaran & Sridharan, Sanjay Phadke, author of Fintech Future, Kunal Nandwani, CEO & Co-founder, Utrade Solutions, and Tanvi Ratna, CEO of Policy 4.0 caught up with Aayush Ailawadi for a chat on new crypto tax rules and what it meant for the future.

Speaking about the government implementing the 30 per cent tax on digital assets at the ground level, Narayan is of the opinion that the government is going to face challenges. “They’re expecting TDS to be deducted on transactions which are going to happen between multiple buyers and sellers  and often through exchanges and other mediums where it not possible to keep a tab on who the buyer and who the seller is,” Narayan explained and added that the tax imposed on crypto should have been different one (like a securities transaction tax) instead of one imposed on the basis of exchange.

Also, if buyers and sellers are going to do a barter, the buyer has to ensure the seller is paying the tax, which is going to be hard to do.

Policy 4.0’s Ratna felt that the crypto tax announcement was just a deterrent following a long period of volatility and months of unfettered activity. In agreement with Narayan, Ratna added that the new tax rule is not going to lead to the outcome that the government is expecting. She explained that on the day of the announcement a lot of volume from Indian exchanges moved overseas and now it’s going to be quite a task for the government to get TDS collected from any such transaction.

Ratna added that unless we accept the decentralised nature of this industry, there’s nothing meaningful that can be done on the policy front. She also said that these regulations should have come in a long time ago.

Padke pointed out that first, cryptocurrency should not be called that since currency is always issued by the government and is a liability of the government. Additionally, speaking about CBDC or Central Bank Digital Currency, Padke acknowledged that it could be seen as the next step of digitalising our lives, but India as a country has already grown in in leaps and bounds as far as digital payments are concerned.

All in conversation were unanimous on the point that a CBDC could not replace crypto since decentralisation lies at the core of crypto, and there is no decentralisation in a CBDC.

“There is zero value in a CBDC coming from the government. Cryptocurrency was developed to work away from the government in a decentralised fashion, where the government has no control. But the decentralisation has been highly centralised since all the crypto companies and exchanges have central CEOs, they are being regulated by the same governments that they were invented to work away from, and now they are going to be taxed by them too,” Nandwani said.

“CBDC, if it is being developed to digitise anything in terms of money and payments, that is a good move, but we can also do without it,” he added pointing to how successful UPI has been in the country.

Essentially, as far as both crypto and CBDC are concerned, experts believe that the right questions are still not being asked.

Also Read: Crypto boomed in 2021 and so did the crypto wealth of criminals

Also Read: Charlie Munger says cryptos should have been banned earlier

Published on: Feb 18, 2022, 3:28 PM IST
Posted by: Jhinuk Sen, Feb 18, 2022, 3:18 PM IST