Crypto surge

INDIA has become the world’s second largest cryptocurrency market, behind the US, by raw estimated transaction volume. This is so despite the imposition of 30 per cent tax on gains and tax deducted at source at the rate of 1 per cent. Investors are getting drawn to trading platforms that are based overseas as new norms make it more difficult for homegrown exchanges to be competitive. Tax evasion presents new challenges. A report by US-based blockchain data platform Chainalysis says India leads the world in grassroots adaptation. It pegs transactions in the country at over $260 billion. Nearly 66 per cent of all users are below 35. The data underscores India’s assertion of global collaboration for effective regulation as digital currency is borderless in nature.

An overarching regulatory and taxation framework in India for crypto assets awaits a global arrangement. The necessity for a responsible cross-border ecosystem is implicit in Finance Minister Nirmala Sitharaman’s assertion that crypto is a threat as well as an opportunity. Recently, the Finance Ministers and Central Bank Governors of G20 nations adopted a roadmap for regulation. Instead of a blanket ban on crypto assets, it vouches for comprehensive regulatory and supervisory oversight. A huge step forward would be implementing, as proposed, the Financial Action Task Force anti-money laundering and counter-terrorist financing standards that apply to virtual assets.

Regardless of the slow mainstream acceptance, cryptocurrency is a global phenomenon. India’s tech-savvy millennials comprise an ideal consumer segment. Its growing popularity can also be attributed to the spread of the Internet. The Reserve Bank of India (RBI) Governor has been a vocal critic of private cryptocurrencies, even as the Centre is adopting a cautious approach. The RBI has been consistently warning against the risks associated with virtual currencies. The crypto fraud detected recently in Himachal Pradesh exemplifies the pitfalls.