Cryptocurrency In India
The future of cryptocurrencies in India is uncertain, but investments in unregulated digital assets, particularly Bitcoin, have shown a startling increasing trend since 2020. Information from different domestic cryptocurrency exchanges indicates that between 1.5 and 2 crore Indians have made investments in the asset class, which reached the $10 billion barrier in November of this year. The country is recognized for investing more frequently in gold and other safe assets, but the rising number of people adopting cryptocurrencies signals a change in the country's investment paradigm. Let's look at the history of the virtual asset before the much-anticipated Cryptocurrency and Regulation of Official Digital Currency Bill.
Launch of cryptocurrencies in 2008:
The start of “CRYPTOCURRENCY” was started with the title “BITCOIN”. A peer-to-peer electronic cash system, in 2008 by an invention developer by the name of Satoshi Nakamoto.
2010: Initial cryptocurrency sale:
2013 saw the release of the first cryptocurrency-related RBI circular:
The Reserve Bank of India (RBI) released a circular in 2013 alerting consumers to the potential security-related dangers associated with the usage of virtual currencies as crypto investments increased in India as well as exchanges like Zebpay, Pocket Bits, Coin secure, Koinex, and Unocoin started to emerge.
2016-2018: Demonetisation and the RBI's Crypto Banking Ban:
The increased preference for digital payments caused by the Demonetisation experiment unintentionally boosted crypto investments, attracting tech-savvy customers. Indian banks continued to accept cryptocurrency exchange transactions, prompting the RBI to issue another circular in 2017 expressing its concerns about virtual coins. Finally, by the end of 2017, the RBI and the Finance Ministry issued a warning clarifying that virtual currencies are not legal tender.
The Central Board of Digital Tax (CBDT) submitted a draught scheme for prohibiting virtual currencies to the finance ministry in March 2018, and the RBI issued a circular a month later prohibiting banks, NBFCs, and payment system providers from dealing with virtual currencies or providing services to virtual currency exchanges. This dealt a significant blow to cryptocurrency exchanges, with trading volumes dropping by 99%.
November 2018: #IndiaWantsCrypto:
Nischal Shetty, Founder of WazirX, launched the #IndiaWantsCrypto campaign on November 1, 2018, ten years after Nakamoto's paper. The campaign's initial impact was seen when Rajeev Chandrashekhar, a sitting Rajya Sabha MP, responded positively. Celebrities such as Unocoin's Sathvik Vishwanath, Polygon's Jayanti Kanani, renowned entrepreneur and investor Anthony Pompliano, and DJ Nikhil Chinapa later joined the campaign. Nischal's consistent tweets and support for the campaign have received widespread attention, with the hashtag trending on Twitter during the February budget session where the crypto bill was announced. #IndiaWantsCrypto recently celebrated 1000 days in July 2021, and the campaign is still going strong thanks to Nischal's tweets. Thousands of other crypto enthusiasts have joined it on its journey.
The Supreme Court overturns the crypto banking ban in March 2020:
The ban was a huge setback, prompting crypto exchanges to file a writ petition in the Supreme Court, and the ban was eventually overturned, declaring the RBI circular unconstitutional. As a result, cryptocurrency exchanges reopened, and the Supreme Court ruling came at the best possible time, coinciding with the crypto boom.
2021: Crypto Bill Announcement:
However, the fight for cryptocurrencies in India was far from over. On January 29, 2021, the Indian government announced that it will introduce legislation to create a sovereign digital currency and, as a result, will prohibit the use of private cryptocurrencies. The Standing Committee on Finance met with the Blockchain and Crypto Assets Council (BACC) and other cryptocurrency representatives in November 2021 and concluded that cryptocurrencies should be regulated rather than banned. Prime Minister Narendra Modi also presided over a meeting on cryptocurrencies with senior officials in early December 2021.
Cryptocurrency in Union Budget 2022:
The finance minister stated that no deduction for expenditure or allowance shall be made when calculating such income, with the exception of acquisition costs. She also stated that any loss incurred because of the transfer of cryptos, or any other digital asset cannot be offset against any other income. The announcement of a high tax on cryptocurrency income has come as a huge disappointment for crypto investors, as Sitharaman also provided no relief in the event of losses. The finance minister also stated that gifts of virtual digital assets would be taxed in the recipient's hands.
"Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset the rate of 1 percent for such consideration above a monetary threshold," Sitharaman said in her Budget speech.
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