According to a report by CNBC TV18, India aims to reach out to crypto industry stakeholders to invite inputs to clarify its regulatory framework for digital assets. A panel led by the Secretary of the Department of Economic Affairs (DEA) is set to publish a consultation paper on digital asset regulations in the country by October 2024.
Lack Of Clear Regulations Hurt Indian Crypto Investors
India is considering contacting crypto industry experts to streamline regulations surrounding the nascent digital asset industry.
In stark contrast to the country’s recent lack of enthusiasm toward the cryptocurrency industry, the Indian government is now mulling releasing a consultation paper, seeking industry stakeholders’ thoughts on efficiently regulating the emerging asset class.
According to sources close to the matter, a panel within the DEA is tasked with drafting the consultation paper. The consultation paper is expected to be available between September and October 2024.
The urgency for clear regulations for cryptocurrencies in India cannot be overstated, as the country’s crypto industry still seems to be operating somewhere in the legal gray area. While clear laws exist regarding the tax implications of crypto transactions, the lack of consumer protection against exchange hacks remains a concern.
The recent hack of WazirX, a leading Indian cryptocurrency exchange, lost customer funds totaling $235 million from one of its multi-sig wallets. This is just the latest example of how Indian crypto investors are essentially on their own if the security of their digital assets is compromised.
Since the hack, the exchange’s token WRX has experienced a significant decline in value, tumbling from $0.36 in March to around $0.15 in August 2024.
However, WazirX has stated that it is working toward restoring the balances of trades between July 18 – 21, 2024. However, a legal apparatus for customers to rely on seems missing.
Merrier Times For Indian Crypto Investors Ahead?
India has cemented itself as one of the largest cryptocurrency markets in the world, consistently ranking amongst the countries with the highest number of crypto investors and traders.
The current tax treatment of crypto transactions in India attracts a flat 30% tax on all crypto-related profits from trading, selling, or spending crypto. At the same time, losses cannot be offset against any gains to reduce tax liability.
A 1% TDS (Tax Deducted at Source) is imposed on the sale of crypto assets exceeding $595 ($119 in certain cases) in a single financial year, discouraging retail investors from actively trading in the industry.
The Indian government’s move to seek industry opinion on clarifying crypto regulations could be seen as a positive sign for investors and traders.
Lowering tax rates would certainly attract more retail participation in the industry, enabling the government to expand its tax base while also allowing profit-making investors to pay less tax liability. It remains to be seen what the consultation paper will propose in the coming months.