India on Crypto – Yes and No
The government of India will impose a 30% tax on income derived from cryptocurrencies and other digital assets as noted by the Minister of Finance earlier this month, which was taken by crypto investors as a tacit approval of crypto and NFTs, despite the fact that it put such income in India’s highest tax bracket and excluded crypto losses from offsetting other income. Given that the Indian government was considering barring cryptocurrencies altogether last November, it seemed the least draconian of the possible outcomes. With an estimated 15m to 20m crypto investors in India holding crypto ‘assets’ of ~$5.37b (unofficial), the idea that the government was developing a taxation system for crypto seemed to some that the government was at least recognizing the legitimacy of cryptocurrencies, or at least that is what the CEO of ZebPay (pvt), a cryptocurrency exchange, said, “Thirty percent tax on income from virtual digital assets, while high, is a positive step as it legitimizes crypto and hints at an optimistic sentiment towards further acceptance of crypto and NFTs”, albeit a bit biased. Tax accountants were a bit less optimistic, estimating that such a tax would really amount to ~42% including surcharges and fees.
That said India’s Central Bank has voiced concerns over the instability of cryptocurrencies and a number of banks cut ties with crypto companies, but the Indian government also indicated that the Central Bank will introduce a cryptocurrency during the next financial year (2023?) using blockchain and other technology. But late last week the head of the Reserve Bank of India stated that “Private cryptocurrency is a huge threat to macro-economic stability and financial stability...investors should keep this in mind that they are investing at their own risk, and these cryptocurrencies have no underlying (value) - not even a tulip”, referring to the Dutch tulip mania that gripped investors in in the early 1630’s until its collapse in 1637. This seems to be the mantra of many governments, including the US, where stern warnings about the risks of cryptocurrencies are given but fear that the government will lose revenue or be seen as ‘technically outmoded’ push them toward issuing some sort of government sponsored cryptocurrency as we noted on 01/21/22. It’s a very complicated issue that is hampered by both a lack of understanding and greed. Back to the gold standard?
That said India’s Central Bank has voiced concerns over the instability of cryptocurrencies and a number of banks cut ties with crypto companies, but the Indian government also indicated that the Central Bank will introduce a cryptocurrency during the next financial year (2023?) using blockchain and other technology. But late last week the head of the Reserve Bank of India stated that “Private cryptocurrency is a huge threat to macro-economic stability and financial stability...investors should keep this in mind that they are investing at their own risk, and these cryptocurrencies have no underlying (value) - not even a tulip”, referring to the Dutch tulip mania that gripped investors in in the early 1630’s until its collapse in 1637. This seems to be the mantra of many governments, including the US, where stern warnings about the risks of cryptocurrencies are given but fear that the government will lose revenue or be seen as ‘technically outmoded’ push them toward issuing some sort of government sponsored cryptocurrency as we noted on 01/21/22. It’s a very complicated issue that is hampered by both a lack of understanding and greed. Back to the gold standard?
Dutch Tulip Price Chart - 1634 - 1637 - Source: Amsterdam Tulip Museum
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