According to a report by CNBC TV18, India wants to reach out to crypto industry players to gather their inputs to clarify its regulatory framework for digital assets. A group led by the secretary of the Department of Economic Affairs (DEA) is expected to release a consultation paper on digital asset regulation in the country by October 2024.
Lack of clear regulation hurts Indian crypto investors
India is considering reaching out to crypto industry experts to streamline regulations surrounding the nascent digital asset sector.
In stark contrast to the country’s recent situation lack Excited about the cryptocurrency industry, the Indian government is now planning to release a consultation paper, seeking input from industry stakeholders on the effective regulation of the emerging asset class.
According to sources familiar with the matter, a committee within the DEA is tasked with drafting the consultation document. The consultation document is expected to be available between September and October 2024.
The urgency of clear cryptocurrency regulation in India cannot be overstated as the country’s crypto industry still seems to operate somewhere in a legal grey area. While there are clear laws regarding the tax implications of crypto transactions, the lack of consumer protection from exchange hacks remains a concern.
The recent hack WazirX, a major Indian cryptocurrency exchange, has lost $235 million in customer funds from one of its multi-signature wallets, just the latest example of how Indian crypto investors are essentially on their own if the security of their digital assets is compromised.
Since the hack, the exchange’s WRX token has seen a significant drop in value, dropping from $0.36 in March to around $0.15 in August 2024.
However, WazirX said it is working on restore transaction balances between July 18 and 21, 2024. However, there appears to be a lack of legal apparatus on which customers can rely.
Brighter Times Ahead for Indian Crypto Investors?
India has established itself as one of the largest cryptocurrency markets in the world, consistently ranking among the countries with the largest number of cryptocurrency investors and traders.
The current tax treatment of crypto transactions in India attracts a flat 30% tax on all crypto-related profits derived from trading, selling or spending cryptocurrencies. At the same time, losses cannot be offset against gains to reduce the tax liability.
A 1% TDS (tax deducted at source) is imposed on the sale of crypto assets exceeding $595 ($119 in some cases) in a single financial year, discouraging retail investors to actively trade in the sector.
The Indian government’s decision to seek industry input on clarifying cryptocurrency regulations could be seen as a positive sign for investors and traders.
Lowering tax rates would certainly attract more individuals to the sector, allowing the government to broaden its tax base while allowing for-profit investors to pay less tax. It remains to be seen what the consultation paper will propose in the coming months.
Featured image from Unsplash, chart from TradingView.com
