For quite some time now, the Indian financial establishment has opposed cryptocurrencies. Without the actions of the Indian Supreme Court, crypto trading could have remained restricted in India indefinitely.
Fortunately, India’s judiciary has taken decisive action to protect economic freedom. Indian authorities are still working to figure out how to integrate crypto trading into India’s unique system.
Showing unqualified fiscal conservatism, the Reserve Bank of India has made several announcements regarding perceived problems with crypto trading.
However, the Indian government is finally showing more openness towards cryptocurrency. At a press conference in early February, Finance Minister N. Sitharaman announced the creation of a new digital rupee.
India’s bold vision for the future
The digital rupee will use blockchain for maximum security and transparency. So far, no one has developed a more efficient alternative to blockchain.
According to Sitharaman, the Indian government will charge a 30% tax on revenue from the sale of crypto. Presumably, the Indian government deliberated a long time before arriving at this percentage.
For now, these deliberations remain opaque to the public. While some people have criticized this rate, analysts have pointed out that it is about the same tax rate paid by lottery winners.
Ideally for India, taxing sovereign currency is easier than taxing private cryptocurrency.
A tax rate like this may well slow the growth of Indian crypto exchanges. However, this represents a relative thaw in official attitudes towards digital currency.
Moreover, the rate of 30% is not immutable. As crypto becomes more integrated into the Indian economic system, regulators may well reduce this tax burden. India will tax donations of digital assets at the same rate.
India is still developing the regulations that will govern the use of the digital rupee. The launch date of the digital rupee is set at the start of the new financial year.
It is almost certain that India will make more announcements before the launch of the currency. As a sovereign currency, the digital rupee will differ from private cryptocurrency in several key ways. A private currency like Bitcoin has no real issuer. This means that a Bitcoin does not represent any type of debt or liability.
How Cryptocurrencies Differ From Fiat Currency
Unlike traditional sovereign currencies, cryptocurrencies can experience quite dramatic price swings. Bitcoin prices are not only sensitive to fluctuations in the global economy.
Also, prices can fluctuate wildly based on statements from celebrities like Elon Musk. Nevertheless, cryptocurrency offers huge profit potential to investors who are willing to accept moderate risk.
Already, thousands of Indians have made substantial income from crypto trading. Fortunately, the digital rupee will have a stable value tied to the traditional rupee.
India is one of many Asian countries making great strides in cryptocurrency. For two years now, China has been testing its own new digital currency.
Thailand and Indonesia have also developed remarkably strong crypto industries. As the second most populous nation in the world, India’s crypto policy is likely to prove highly influential throughout Asia.