The market capitalisation (m-cap) of cryptocurrencies topped the $1-trillion mark on Wednesday, capping a weeklong bull run as in India experts cautioned about the future of the digital assets.
Bitcoin, the largest cryptocurrency by m-cap, was nearing $23,500 after rising nearly 20 per cent in the last seven days, according to coinmarketcap.com. Ethereum, the second largest cryptocurrency, was trading above $1,500, up nearly 45 per cent in a week.
“Bitcoins price surge has ignited some bullish sentiments among investors. It reinforces the commitment to the fundamentals of Bitcoin. However, we have also witnessed Bitcoin’s dropping to the lowest hence we will have to wait and watch the global market movements to understand the market changes better,” said Mridul Gupta, chief operating officer at CoinDCX.
Sridhar R, partner at Grant Thornton Bharat, said India’s legislation in April cleared the air on taxing digital assets. “With government implementing the withholding tax and income tax provisions as recommended in the Finance Act of 2022, the crypto market in India is all set to comply with these strict tax provisions. While these impose difficult withholding tax compliances on the market players and platforms, they do clear the air under income tax law, to some extent”, he said.
From April 1, a 30 per cent tax was applied on income from the sale of crypto assets. From July 1, an additional 1 per cent tax was applied in the form of tax deducted at source (TDS).
Finance Minister Nirmala Sitharaman, in a written reply to Parliament on Tuesday, said the Reserve Bank of India is of the view that cryptocurrencies should be “prohibited”. She urged international collaboration in regulating the assets.
“If this proposal [GST on cryptocurrencies] is accepted, then India is all set to be a prohibitively high tax jurisdiction for crypto players and the market in general. The current buzz is perhaps in anticipation of the GST proposal, with people trying to square off their positions at the soonest”, he said.
“If the GST proposal is accepted as is, or is not diluted to a lower rate of 12 per cent to 18 per cent, then the crypto market in India is likely to fizz out in the coming days. There is also a real concern on cross-border settlements of these instruments under provisions of Indian Exchange Control law with enforcement agencies also beginning to investigate such transactions. This is also likely to lead to diminishing interest in such assets further.”
Vaibhav Gupta, founder of DesiCrypto, a marketing platform, was optimistic that India would allow cryptocurrencies space. “Cryptocurrency/Blockchain industry is one of the most important opportunity for young Indian audience, not just because of the risk-reward theory, but because of the immense opportunities. One can’t ignore the importance of it and thus losing the ground to other country”, he said.
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