Cryptocurrencies, such as Bitcoin, Ether, and Matic, became a hot topic in the country as they delivered huge profits in recent times. However, its hugely volatile nature and grey regulatory status have always kept the demand side, investors, on worry. Now, the supply side, or exchanges, are facing funding issues, which are adversely affecting trading in cryptocurrencies.
Recently, crypto exchange Coinbase halted rupee transfers to its trading app via UPI as the National Payments Corporation of India (NPCI) earlier said it was “not aware" of any crypto exchange using its payment network, according to an ET report.
“We are committed to working with NPCI and other relevant authorities to ensure we are aligned with local expectations and industry norms," a Coinbase spokesperson said in a statement to Bloomberg.
Apart from Coinbase, four other crypto trading companies have either suspended rupee deposits or seen banks and payment gateways pull support for money transfers onto their platforms, said the ET report.
Tax on Cryptocurrencies
The Union Budget 2022 proposed a 30 per cent tax on profit made from the sale of all crypto assets, with a one per cent tax deducted at source on all such transactions. The new rules have become applicable from April 1. A new section 115BBH has been inserted in the Income Tax Act, 1961, to tax virtual digital assets. The rules also say that loss arising from digital asset cannot be carried forward to the next year.
In the absence of any law to regulate cryptocurrencies, the legal position of such assets is not clear as of now. After the Union Budget’s tax proposal on cryptocurrencies, investors said the provisions have effectively legalised crypto trading. However, Finance Minister Nirmala Sitharaman has said taxing cryptocurrencies does not mean it has been legalised. The matter is still being considered.
In Rajya Sabha also, the finance minister has said the Centre will decide on banning or not banning cryptocurrency later, but taxing transactions doesn’t legitimise it.
In February during a press conference, Sitharaman had said that the government and the Reserve Bank of India (RBI) are “on board" with respect to the treatment of cryptocurrencies and said that discussions are going on on the regulatory treatment of such digital virtual assets.
She had said: “We are all discussing prior to the Budget, discussion continues and we shall continue to have discussions. All the decisions which have been taken on it, obviously it has a very serious, it is a digital currency from the central bank of some description, so obviously with more focus having had consultations."
Sitharaman has also said that the government will state its position on cryptocurrencies after completing the ongoing consultation process. In the past, the Reserve Bank of India has cautioned people against investing in cryptocurrencies.
In a reference to a speculative bubble that gripped the Netherlands in the 17th Century, RBI Governor Shanktikanta Das has said that these digital assets lack the underlying value of even a tulip.