India has been one of the fastest-growing markets for cryptocurrency trading, even though the ability to trade Bitcoin and its peers freely and anonymously undermines the country’s limits on the convertibility of its currency, the rupee. The central bank has been pushing for an official digital currency while voicing its concerns over the private crypto market. In February, the government decided to formally recognize crypto trading, while also discouraging it by imposing a stiff levy on transactions.
1. What did it do?
The decision to tax income from the transfer of virtual assets at 30% effectively greenlights crypto trades, while making them prohibitively expensive. Finance Secretary T. V. Somanathan said the government will treat crypto assets like earnings from gambling and speculation. How the new rules will work in practice isn’t clear, given the large volume of crypto trading that takes place beyond the view of financial authorities. The new tax may encourage crypto traders to switch to platforms in other countries, said Darshan Bathija, co-founder and chief executive officer of Vauld, a crypto service based in Singapore. That could be welcomed by India’s central bank: the government also announced that the Reserve Bank of India will launch its own digital currency in the year starting April 1.
2. How big is crypto in India?
It’s one of the biggest in the region and expanding rapidly. An October report from Chainalysis, a crypto-analysis firm, found the Indian market grew 641% over the period from July 2020 through June 2021. As a whole, central and southern Asia was the fourth-largest crypto market studied, with more than $572.5 billion in value received during that period, or 14% of global transaction value. Transfers worth more than $10 million represented 42% of transactions sent from India-based addresses during that period, versus 28% for Pakistan and 29% for Vietnam. That suggested a more mature Indian market. At the same time India -- with a relatively young and tech-savvy population -- was second only to Vietnam in growth of crypto adoption by retail investors in the region.
