After months of consultation with domestic as well as foreign stakeholders and organizations such as the IMF and World Bank, India is in the last stages of finalizing a consultation paper on cryptocurrencies. According to the economic affairs secretary Ajay Seth, the government is “fairly ready.”
India’s Consultation Paper on Cryptocurrencies
While addressing reporters on the backdrop of an event, Seth unscored the need for a global consensus to reach on cryptocurrencies and added that India would look at regulations implemented in other countries before deciding how it would regulate the vast industry.
He was quoted saying:
“One, our consultation paper is fairly ready and we went into a deep dive and have consulted not just the domestic institutional stakeholders but also the World Bank, and the International Monetary Fund. So we hope that we will soon be in a position to finalize our consultation paper.”
Hostile Crypto Climate
The Indian government has been known to maintain the regressive “blockchain, not Bitcoin” stance, which has forced many crypto companies to relocate to a jurisdiction with friendlier regulations. The harsh crypto tax laws introduced in the annual budget this year have been passed hastily with no recommendation from the experts and stakeholders in the ecosystem, thereby driving many investors away from local exchanges. Under the new rules, profits from cryptocurrency are taxable at 30%. On the other hand, there is no provision for setting off and carrying forward unclaimed losses.
In yet another setback, the National Payments Corporation of India (NPCI), which oversees the Unified Payments Interface (UPI), recently released an official statement clarifying that they are not aware of any crypto exchange using UPI. For the uninitiated, UPI is a commonly used instant real-time payment system that facilitates inter-bank transactions using a mobile phone. The statement was deemed bizarre as many domestic crypto players, including WazirX, were already offering UPI services via mobile wallets. Soon, UPI services for other exchanges serving the country’s crypto ecosystem also got disabled.
Coinbase, which had just announced its entry into India, suspended operations within three days. Its CEO Brian Armstrong called out the Reserve Bank of India (RBI) and accused the agency of violating the Supreme Court order and putting “informal pressure.” Meanwhile, the RBI is keener on launching in-house CBDC and revealed investigating the pros and cons of introducing one.
Despite the lack of clarity and hostile regulatory climate, the Indian digital asset market has continued to grow. According to Finder’s NFT Gaming Adoption Report, India has made it to the top 3 countries where play-to-earn (p2e) games are flourishing.