In a budget speech held on Tuesday, India’s Finance Minister Nirmala Sitharaman announced that they would be implementing a 30% tax on any income from the transfer of virtual digital assets. According to Sitharaman, “There’s been a phenomenal increase in transactions in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime.”
Despite this new announcement, India still lacks a comprehensive regulatory framework for cryptocurrencies. Although a draft of a cryptocurrency bill was introduced during the winter session of Parliament, it was pulled in the final days of the session, which ended in December. According to other outlets, the Indian government has been studying regulatory responses of other nations for guidance on forming their own legal framework.
The move to tax cryptocurrencies flies in the face of repeated warnings from the Reserve Bank of India (RBI; the country’s central bank), who said earlier this year that “Private cryptocurrencies pose immediate risks to customer protection and anti-money laundering/combating the financing of terrorism,” adding that they are “prone to fraud and to extreme price volatility, given their highly speculative nature.” Based on these and other concerns, the RBI had reportedly told the central board of directors that it favors a blanket ban on cryptocurrencies.
All of this parallels what’s unfolded in Russia over the last several weeks. Similarly to the RBI, the Central Bank of Russia released a report proposing a blanket ban on cryptocurrencies on Russian territory. However, just days after the report was released, Russian president Vladimir Putin urged lawmakers to consider the potential advantages of cryptocurrencies.
According to at least one analysis, India leads the world in total cryptocurrency users, with over 100 million users (over 7% of the country’s population), nearly 4 times that of the next largest user base, the United States.