Ahead of the national budget presentation on February 1st by Finance Minister Nirmala Sitharaman, the Indian cryptocurrency sector is urging for regulatory clarity and a more streamlined tax system. This appeal is particularly relevant as India is at the forefront of global cryptocurrency adoption, even as investors navigate strict domestic rules and high taxation.
Vishal Sacheendran, who heads Markets at Binance, a leading crypto exchange, emphasized the need for “progressive measures” to stimulate growth in the industry. “We firmly believe that a well-structured regulatory framework is essential to realizing the full potential of Virtual Digital Assets (VDAs) in India. This framework should foster innovation, ensure transparency, and safeguard investor interests,” Sacheendran stated.
Furthermore, Sacheendran highlighted India’s opportunity to become a major global center for Web3 and blockchain technologies. He advocated for the creation of an ecosystem that supports blockchain development to attract international talent and investment, simultaneously generating local employment opportunities in emerging tech fields.
Industry analysts also suggest aligning India’s cryptocurrency regulations with international standards to maximize the industry’s overall benefit.
Raj Karkara, Chief Operating Officer at the ZebPay exchange, expressed that the upcoming budget should reconsider the existing 30% tax on cryptocurrency gains and the 1% Tax Deducted at Source (TDS) mechanism.
“Simplified tax structures can encourage greater participation while boosting liquidity and trade volumes. Officially recognizing crypto as a formal asset class, alongside establishing clear regulatory guidelines, will protect investors and create a firm base for industry growth,” Karkara explained.
Crucially, the government extended the scope of anti-money laundering/counter-terrorism financing (AML-CFT) regulations to include VDA service providers in March 2023, under the stipulations of the Prevention of Money Laundering Act (PMLA) of 2002.
As part of its compliance enforcement efforts, the Financial Intelligence Unit India (FIU-IND) issued show-cause notices to nine offshore VDA service providers for failing to comply with local regulations, as per Section 13 of the Prevention of Money Laundering Act (PMLA) of 2002.
In addition, Karkara advocated for the introduction of policies that encourage innovation, such as offering subsidies or tax incentives to blockchain and Web3 startup ventures.
“Such initiatives will help establish India as a global leader in decentralized finance, digital identity solutions, and asset tokenization.”
Shivam Thakral, CEO of BuyUcoin, India’s second-longest-running cryptocurrency exchange, also emphasized the necessity for policies that attract investment and encourage talented professionals to return to India, thereby aiding in the expansion of Web3 businesses.
“The government can fully capitalize on blockchain technology and decentralized finance by enacting clear guidelines and revising existing tax regulations. We anticipate that if the forthcoming budget includes supportive measures, India can emerge as a global frontrunner in Web3. This provides an opportunity for the government to reinforce its dedication to constructing a robust digital economy that provides advantages to all stakeholders,” Thakral concluded.