An update from CNBC TV18 reveals that India is reaching out to stakeholders in the crypto industry to gather feedback and establish clear regulatory guidelines for digital assets. A panel under the Department of Economic Affairs (DEA) plans to release a consultation paper on digital asset regulations in India by October 2024.
Initiative to Address Regulatory Ambiguity in India’s Crypto Sector
India is exploring discussions with industry experts to bring coherence to regulations governing the emerging digital asset sector.
In a notable shift from its earlier stance, the Indian government is contemplating the publication of a consultation paper to gather insights from industry stakeholders on effectively overseeing this evolving asset class.
Sources indicate that a DEA-led panel is spearheading the formulation of this consultation paper, expected to be accessible between September and October 2024.
Establishing unambiguous regulations for cryptocurrencies in India is crucial, as the sector continues to operate in a legal grey zone. While tax implications for crypto transactions are defined, the absence of safeguards against exchange breaches raises concerns.
The recent WazirX hack, which resulted in a loss of $235 million from a multi-sig wallet, underscores the vulnerability faced by Indian crypto investors in the absence of secure legal protections.
Post the incident, the value of the exchange’s token WRX plummeted significantly from $0.36 in March to approximately $0.15 by August 2024.
Despite restoration efforts by WazirX for trades impacted between July 18 – 21, 2024, a structured legal recourse for customers seems lacking.
Potential Positivity on the Horizon for Indian Crypto Community
India has solidified its position as a major cryptocurrency market globally, consistently housing a large number of crypto investors and traders.
The current tax regime in India imposes a flat 30% tax on profits from crypto activities, with no provision for offsetting losses against gains, further imposing a 1% TDS on crypto asset sales exceeding $595.
The Indian government’s move to seek industry feedback on clarifying crypto regulations is a promising development for investors and traders.
A reduction in tax rates could potentially boost retail engagement in the sector, expanding the tax base for the government while enabling profitable investors to reduce tax burdens. The specifics of the consultation paper’s proposals will be closely watched in the forthcoming months.
