India, which has had a tumultuous relationship with the crypto sector, might have finally found a lasting solution. According to a recent Reuters report, the country will not ban crypto. Instead, it plans to tax the crypto sector.
Details Of Crypto Taxation
For several years, India’s central bank has been opposed to the crypto sector. At one point, it banned all banks in the country from handling crypto transactions. However, the country’s Supreme Court reversed the ban, giving a lifeline to the nation’s crypto sector.
However, banks have been slow to open up their services to crypto companies. One reason for this was that the nation’s parliament was considering legislation that would ban crypto trading in all its forms in the nation. In a new twist, the government has decided not to ban crypto but tax it instead.
The government will now require traders to pay a 30% flat tax on all income from crypto trading, as well as NFTs. India joins the ranks of other major economies such as the US and Germany where crypto has not been banned but is instead taxed. Besides taxing crypto, the government plans to introduce a national digital currency.
India’s CBDC Plans
India plans to launch a central bank digital currency via the nation’s central bank. According to Indian Finance Minister Nirmala Sitharaman, the central bank will launch a CBDC before April 2023. However, few details have been provided on the planned CBDC. The Indian government has often portrayed itself as embracing technology, and it has expressed interest in eliminating paper transactions. The recent announcement is in line with this aspiration.
India will join a growing list of countries that have been looking into the idea of a CBDC. Even the US Federal Reserve recently released a paper on the feasibility of a CBDC. Hong Kong has also been seriously looking into a CBDC. In October 2021, the Hong Kong central bank released a white paper on a CBDC. Other central banks have already concluded tests into the launch of a CBDC. For instance, in December 2021, the central banks of France and Switzerland announced the successful completion of a CBDC test in collaboration with the Bank of International Settlements.
India Will Not Ban Crypto After All
In November 2021, the Indian Prime Minister issued a scathing criticism of the crypto sector. His government then proposed that all crypto coins should be banned. However, India, which has one of the world’s largest youth populations, did not take the news well. There was a lot of criticism over the proposed ban in a country whose massive youth population has embraced crypto. By announcing the 30 percent tax, it shows that the country has no plans to ban the sector at all.
To give a glimpse of the interest in crypto amongst Indians, WazirX, a leading crypto exchange in India, announced in 2021 that its user base had hit 10 million. That figure represented a whopping 1735% year-on-year rise. The company further revealed that these users had traded $43 billion worth of crypto via the platform.
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