Rama Krishna Sangem
Union Budget for 2022-23 is a watershed mark for crypto currencies, err, assets. Finance Minister Nirmala Sitharaman proposed a tax of 30 per cent on the gains of crypto units, on the lines of lottery prize money proceeds. But, not banned as Reserve Bank of India two year ago ordered through a circular, which was later struck down by the Supreme Court.
What is the immediate impact of this move? All those who are in crypto trading are jubilant that they are no longer treated as criminals in the country just like drug peddlers etc. Moreover, they will be recognised officially and treated with due respect as they contribute to the direct taxes of the country’s exchequer. A sort of social status.
On the other hand, some portion of savings and investments will invariably go to crypto assets, as they are now called. This portion of funds will be diverted from other forms of investments like gold, real estate and stock markets. To what extent this diversion will be is to be seen in the coming days depending on the trends.
Till now the US and a few other developed countries are following this line – of taxing the crypto units, instead of banning them. China has banned them completely while El Salvador has fully recognised Bitcoin as a form of currency, called Chivo, in September 2021. In local dialect, Chivo means Cool.
India was in two minds on this issue of whether or not to allow crypto currencies – to follow the line of US or China? Finally, India chose US line, to treat them as capital assets which can be taxed like any other assets. At a recent G-7 meeting, the heads including President Joe Biden called for freedom of Internet and crypto assets (if not as currencies).
At the same time, RBI will come up with its digital currency very soon, as per Nirmala Sitharaman in the budget speech. A suitable name will be given to the digital currency which will be treated as a full currency, like Rupee. With this, we are encouraging both – users of blockchain technology (through RBI) and crypto traders (by allowing them to exist).