Cryptocurrencies like Bitcoin, Ether and Matic have become the talk of the Indian market thanks to the profits they have delivered in recent times. However, this hugely volatile market and its current grey regulatory status have dropped their demand and led investors to worry. Now, cryptocurrency is facing issues on the supply side or even during exchanges, adversely impacting the market’s previous stronghold.
Recently, Coinbase had to halt its money-led transfers to its trading app via UPI as the National Payments Corporation of India (NPCI) said that it was not aware of such crypto exchanges using its payment network. A Coinbase spokesperson remarked, “We are committed to working with NPCI and other relevant authorities to ensure we are aligned with local expectations and industry norms.”
However, this is not it. Four other crypto trading companies have either suspended their rupee deposits or have witnessed payment providers and banks pull out support for such money transfers.
The heavy tax on cryptocurrencies has left investors worrying
The Union Budget 2022 proposed a 30% tax on profits made out of crypto exchanges with a 1% tax deducted at the source of all these transactions. These new rules have become applicable from April 1. A new section, 115BBH, has been added to the Income Tax Act 1961 for such tax virtual digital assets. The rules also say that the losses from such digital assets cannot be carried forward to the following year.
In the absence of a regulatory body, the legal position of such assets is still a debacle for many. After the Union Budget’s tax proposal on cryptocurrencies, investors believe that this is a hint of the legalization of crypto trading in the country. However, the Finance Minister, Nirmala Sitharaman, said that taxing cryptocurrencies doesn’t mean that such digital assets have been legalized. This matter is still under consideration. She contemplated the same in Rajya Sabha, saying that the Centre will decide on whether they must ban or not ban cryptocurrency.
However, in February, Sitharaman said that the RBI and the government are “on board” concerning the cryptocurrency treatments and that the discussions are ongoing at the moment. She said, “We are all discussing prior to the Budget, discussion continues, and we shall continue to have discussions. All the decisions which have been taken on it, obviously it has a very serious, it is a digital currency from the central bank of some description, so obviously with more focus having had consultations.”
She continued by saying that the government is yet to decide their position on cryptocurrencies after completing the ongoing consultation process.