A huge deal suddenly happened in cryptocurrency policy. Nirmala Sitharaman, the finance minister declared for the 2022-23’s Union Budget a tax of 30 % will be levied on any profit made from digital virtual assets. She also announced that there will be a tax deduction at 1 % at source and a new CBDC that is central bank digital currency will be launched.
Before this, the world of cryptocurrency was not getting much mainstream attention. But suddenly in print and visual media, it is getting huge coverage. It is the perfect time to see where it is headed.
Similar to the cryptocurrency coins prices, the crypto policy is swinging from an extreme to another. Four years back, RBI effectively ban this digital asset and forbade financial institutions to do anything with it. This ban got lifted in 2020 by Supreme Court’s order. Then the government wishes to put a ban on private cryptos via a bill that provided a strong jail term of 10 years if found to deal in cryptocurrency. But it was not tabled. Now a tax got imposed and it implied some kind of recognition. This is a huge change in the world of cryptocurrency.
Is the status of cryptocurrency legalized?
- Taxing crypto does not really imply that it bears a legal status.
- In an interview after the Budget, the Finance Minister stated that any private crypto is not a currency but an asset.
- However Somanathan, the Finance Secretary said that it is similar to gambling.
- Moreover, the RBI opposes cryptocurrency and is keen to put a ban on it.
- The Governor also warned that cryptocurrency imposes a huge threat on financial stability and it includes no underlying value.
- Officials stated that putting a tax on the asset does not make it legal.
What is the scenario for investors?
- With all such regulatory uncertainty, the investors are not backing off from crypto.
- They are more interested to invest in it. In 2021 one crore investors in India made the crypto investment.
- Now the number has increased to almost 2.5 crores.
- The invested amount is INR 40,000 crore orders.
- A lot of start-ups established good cryptocurrency exchanges like bitqs
- It made it very easy to place and withdraw money in cryptocurrency in a low amount such as INR 100.
- Such names have become very popular and they are completely unregulated.
- But they have successfully gained the trust of all investors and drawn in financing from the venture capital.
Launch of new digital currency
- A new digital rupee also got launched.
- It is not much clear how this CBDC will be highly useful to the common people compared to a digital payment system that is already operating well.
- Now with UPI payments and online mobile wallets, cash has become digital.
- By using the mobile people can now scan any QR code and enter the passcode to digitally pay any amount such as 10 rupees to even a street vendor.
- Seamlessly money is picked from a person’s bank account and placed in the bank account of the vendor.
- It will be a challenging activity for the new digital rupee to beat it.
Risk of cryptocurrency
- Cryptocurrency is high risk and volatile. It is scam prone too.
- But investors are always prepared to take chances to get rich fast.
- Undoubtedly regulation is required.
- However new dApps based on blockchain technology are getting developed in some areas such as digital art, smart contracts, gaming, and so on.
- It is looked upon as the start of a new decentralized internet phase.
- The entire social media world offers all types of personalized services at a button’s click.
- Like this in the next phase is blockchain technology drive, a lot of applications may be seen in those areas that can never be imagined now.
- Many domestic start-ups have been emerging here.
- Polygon offers a platform to developers for building dApps more efficiently on the blockchain.
So after the Union Budget, cryptocurrency will be continuing to flourish; be it legal or not. Individuals will invest in it and speculate. They will make profits and lose too. Also new worldwide opportunities will arise in developing applications that are blockchain-based. The upcoming regulatory system must adapt to such fast emerging trends. Because like or hate it, it is the future.