Budget skips cryptos even as India works in sync with G20 on regulation

FM Nirmala Sitharaman

Finance Minister Nirmala Sitharaman skipped any update on crypto regulations and taxes in her Interim Budget speech on February 1, as India continues to work with the G20 nations aligned with the ministry’s view of having a common global regulatory framework.

The government has been in talks with the Indian crypto industry and has taken several measures in the recent months to meet some of their demands. These include sending show-cause notices to offshore crypto exchanges such as Binance and Kucoin in December, for not being compliant with the local anti-money laundering laws and not getting registered in the country.

This led to Indian retail crypto investors opting for the offshore exchanges to evade 30 percent virtual digital asset (VDAs) tax, and the 1 percent TDS charged on every crypto transaction of over Rs 10,000.

The government also followed up on this show-cause notice, making Binance, Kucoin and seven other exchanges delist from Apple App Store and later blocking their URLs in India.

While the crypto industry too didn’t have much hopes from this year’s budget as it is an interim budget ahead of the 2024 elections, in their recommendations, the industry body Bharat Web 3 Association (BWA) had asked for regulatory tightening of offshore exchanges, and reiterated its demand for rationalisation of taxes.

Citing data from blockchain analysis firm Chainalysis, BWA said that India leads in grassroots crypto adoption globally and ranks as the second-largest market in terms of raw transaction volumes in 2023.

CoinDCX co-founder Sumit Gupta had earlier told Moneycontrol that to evade these taxes, over 90 percent of the traffic from Indian crypto exchanges have moved to offshore exchanges.

The recent US Securities and Exchange Commission (SEC) approval of Bitcoin spot ETF trade hasn't done much to change the regulator's views on crypto. Reserve Bank of India (RBI) Governor Shaktikanta Das even compared the popularity for crypto with Tulip mania.

"We are all familiar with the Dutch term Tulip Mania in Netherlands which built up into a big asset bubble and then collapsed. So I don't think the world and in particular, the emerging market economies can afford crypto mania, which will lead to similar outcomes," he had said at a media event last month, after Bitcoin ETF's approval.