Experts in the cryptocurrency sector emphasized the need for enhanced regulatory clarity and a comprehensive tax framework that aligns with the trading and usage of digital assets during the Business Standard BFSI Insight Summit on Tuesday.
During a discussion titled Taxed but Not Trusted: Can India Regulate an Asset It Doesn’t Recognise?, panelists addressed various challenges faced by the sector, evolving investor behaviors, and emerging opportunities like tokenisation.
Vandana Ahuja, a partner at EY India, pointed out that while the taxation of digital assets has become more transparent, there are still lingering issues affecting traders. She specifically highlighted the challenges posed by the 1% TDS, which can disproportionately impact frequent traders, where the withheld tax may exceed their profits.
Ahuja stressed the importance of voicing these concerns to the government, particularly as tax authorities enhance their transaction tracking through data-sharing arrangements with international bodies.
Vikaas Sachdeva, CEO of BitDelta India, noted that India’s digital-first strategy positions it as a vital market, but he urged caution against relying solely on overall adoption statistics.
“Adoption isn’t the issue. It’s noteworthy that a significant portion of investment is emerging from tier-II, III, and IV cities, despite the 30% tax and 1% TDS. Following the introduction of the 1% TDS, 81% of transactions for leading exchanges diminished. Traders didn’t stop; they simply moved their business abroad,” he explained.
S B Seker, head of Asia-Pacific operations at Binance, remarked that the dialogue surrounding regulations has seen little advancement, even with a large user base in India. He pointed out that the market’s needs appear to be outpacing policy developments, while exchanges are innovating tools to assist regulators in combating fraud and enhancing transparency.
Vimal Sagar Tiwari, co-founder of CoinSwitch, underscored India’s rapid technological uptake and straightforward onboarding processes. “India is a crucial market for crypto investment,” Tiwari stated. He mentioned that platforms are venturing into new products and business strategies, emphasizing the ongoing importance of education within the sector.
The panelists also explored tokenisation, which leverages blockchain technology to digitally represent assets, thus broadening the array of investment products for clients. Tiwari emphasized its significance as a blockchain application with the potential to make real-world assets programmable. “The practical applications for tokenisation, akin to the UPI movement, are still forthcoming,” he noted. Sachdeva commented on the increasing complexity of the sector, suggesting that trading is just one aspect of the broader ecosystem. Tiwari cautioned that customer safety should not hinder innovation, while Seker reiterated that exchanges are already employing technology to bolster fraud prevention and equip regulators.