If there’s one industry that hasn’t stopped to catch its breath this year, it has to be the crypto industry, especially in the Indian context. From film stars releasing their digital avatars on the metaverse (looking at you Ajay Devgn and team Rudra) to new tax laws governing crypto assets as well as the overall traction that NFTs have been generating within and outside its community, there’s literally been so much happening in the crypto space that making sense of it became the need of the hour.
Which is why we were fortunate to pick the brain of one of Avinash Shekar, CEO of ZebPay, one of the oldest crypto exchange in the country to learn more about the changes in the industry and what investors can expect going forward.
What do you think of the government’s stand to introduce a 30% tax on crypto assets?
The introduction of a 30% tax on crypto-assets is a progressive step toward legitimising crypto as an asset class in India. The introduction of tax was also a bittersweet moment for many investors.
High tax rates of 30%, similar to the rates associated with gains from gambling, will dissuade investors from investing in crypto as opposed to traditional financial instruments, which attract significantly lower rates.
Will high taxation deter potential investors from joining the crypto community?
Definitely so. Such tax barriers might act as a deterrent to using Indian exchanges and many might take flight to external global exchanges for anonymity, thereby allowing them to avoid taxation entirely. Crypto is driving revolutionary change across the world, and it is in our nation’s interests to encourage participation and not dissuade crypto users and investors.
Please share your views on the current suspension of UPI funds addition by major banks?
The decision was taken after National Payments Corporation of India (NPCI) released a statement to this effect. The statement had stated that they were unaware of any crypto exchange operating in India that allows buying crypto using UPI. Therefore, due to regulatory uncertainty, crypto exchanges have halted accepting money through UPI from the investors.
In our view, the suspension has significantly impacted the crypto investors who used the UPI payment method. Crypto investors in India often preferred the UPI payment mode due to its ease and accessibility to transfer money to buy cryptos from the crypto exchanges. Now, with the current suspension of UPI funds, investors have lost out on that option.
How is ZebPay committing to look after its users?
Crypto is the future of global financial markets and blockchain is the hotbed of innovation. We at ZebPay are wholly committed to serving India and the Indian crypto community, by providing a safe, secure, and seamless trading experience to our members. We also believe that education is the need of the hour even as we see the adoption of crypto grow. Therefore, we are committing large-scale initiatives and investments towards educating the Indian audience about the nuances of crypto investments.
Ukraine is auctioning war NFTs, El Salvador is using bitcoins. Where do you see India going in crypto space?
About 20 million people in India began investing in cryptos in 2021. Currently, Indians hold crypto assets worth $5.3 billion. This is an indication that there is a growing interest in crypto amongst the Indian audience and people are slowly waking up to the enormous potential that crypto investment carries.
What is your opinion of the proposed digital rupee and what features would you want to see it with?
Union finance minister Nirmala Sitharaman announced that the Reserve Bank of India (RBI) will soon issue a central bank-backed digital currency (CBDC). The digital rupee is likely to go live in the new fiscal year.
If the proposed introduction fructifies then we see reduced transaction demand for bank deposits, besides reduced settlement risks. Plus, the need for interbank settlement will disappear as CBDC will be transacted instead of bank balances. It would also enable more real-time and cost-effective globalisation of payment systems. For instance it will make it easier for an Indian importer to pay an American exporter on a real-time basis in digital dollars, without the need for an intermediary.
What is the ideal future of crypto assets in India, according to you?
Today, the tug of war between regulators and crypto organisations shows that crypto is going mainstream. Regulation isn’t bad, at the same time regulation should not cripple an industry. As more countries legalise cryptos, and some even try to follow in the footsteps of El Salvador by making cryptos legal tender, it’s clear that cryptos will never take a back seat any time soon. It goes without saying that the future of cryptos is inextricably linked to the future of business, technology, and society in general. We even think that in the stocks of the future, will likely come in the form of corporate cryptocurrencies. This way, each company will be able to form its own ecosystem in which employees can participate. Looking at the rate at which things are progressing, analysts are predicting that the crypto market will triple in overall size by 2030, with an approximate valuation that will hit around $5 trillion.
The Hon. FM has also called for a global framework to prevent the misuse of crypto assets. What are your views on the same?
Crypto is, by nature, borderless. While this is one of the contributory factors leading to global adoption, it also means that crypto can be used for cross-border illicit activities. The Hon. FM has rightly pointed out that this can only truly be prevented through a coordinated global effort and as such, a global framework to prevent misuse of crypto assets will help ensure that crypto is used only for legitimate purposes thus preventing white collar crimes.
How is the crypto tax affecting the budding Indian NFT market?
Unlike day-trading of crypto assets, wherein investors make a number of transactions in a given period of time, NFTs are traded far less often. The 30% tax on profits combined with the proposed 1% TDS applicable from July 1st will act as a barrier to NFT investments, but to a lesser degree than crypto trading. Lack of set-off of losses will also drive investors to take a longer-term approach to their NFT investments.
Celebs, cricketers, and other known figures seem to be relatively unaffected and are yet to launch NFTs. Will their public image help in the widespread use of NFTs?
Yes. Influential public figures launching NFTs will drive increased awareness and investment intent from their followers and extended audience, across channels. NFTs are the ultimate avatar of collectibles which have always been a favourite among fans of celebrities. The extended reach of popular celebrities will go a long way to drive the overall use and acceptance of NFTs.
What are the steps that ZebPay is planning to take to clear any confusion amongst its users on govt’s stand to introduce a 30% tax?
ZebPay is constantly making considerable efforts to educate our users on the new crypto tax laws and their overall implications. Starting from AMA sessions on social media channels to educational content on owned and leveraged media channels, we continue to do our bit to help our users understand exactly what the laws mean, what their impact is, and how to ensure that they comply with this new piece of legislation. We are also conducting a webinar for our users with leading tax experts from India as speakers.in order to help our users get their doubts and queries resolved.
Can you cite global examples of how cryptos are taxed that you find India can follow?
While the new crypto laws are a step in the right direction, we believe that crypto investments should ideally be treated at par with investments in traditional financial securities. The US is a great example of what we believe is fair treatment for investors, the industry, and the nation. Crypto investments are subject to the same capital gains tax laws as equity investments. The law also allows for set offs and carry forward of losses. All this enables investors to create a well-diversified investment portfolio without the added burden of higher tariffs on crypto assets. Importantly, it doesn’t discourage investors from trading in crypto assets.
We’re glad that most of the takeaways from the conversation point to a great future for the crypto industry. We’ll be following news more keenly from now on. As for you, if you haven’t yet opened your crypto account, now’s the best time to do so on ZebPay here.
This is a Partnered Post.