As the Union Budget 2023 approaches closer, the cryptocurrency market is pinning its hopes on Finance Minister Nirmala Sitharaman to announce a lower tax on virtual digital assets, which is battling with high volatility amid FTX’s bankruptcy and aggressive rate hike by central banks globally. The crypto market, which is still not under a proper regulator, expects FM Sitharaman to bring in regulations to classify crypto as an asset class.

Industry experts hope the upcoming Union Budget will create a regulatory framework for digital wallet companies and a single window clearance to register and operate in India under the supervision of relevant regulatory authorities.

In the last Union Budget, the central government proposed to tax the gains made on virtual digital assets at 30% and 1% TDS on transfer of cryptos in a bid to discourage transactions in cryptocurrencies.

Speaking to Fortune India, Shivam Thakral, CEO, BuyUcoin, said the crypto sector needs immediate support from the regulators for creating a business-friendly environment that will enable the growth of blockchain companies in India. “We are delighted to see that our Finance Minister is actively involved in creating a global consensus for policy around crypto but Indian crypto entrepreneurs are looking forward to a fast-track implementation of the regulatory framework for crypto exchanges.”

“Crypto investors should be allowed to offset and carry forward their losses to provide a level playing field to crypto assets and the TDS exemption limit should be raised to a reasonable level. Such positive steps will encourage responsible mass adoption of digital assets and propel India into the next phase of the Web3 economy,” he added.

Mahin Gupta, Founder of Liminal, a digital wallet infrastructure platform, said the Indian government took its first step towards regularising crypto by introducing a formal tax regime for digital assets. The formal tax structure gives institutional investors much-needed clarity and direction to look at digital assets as an alternate asset class, Gupta said.

“Today, India has an estimated 15 million cryptocurrency users. It is also home to 11% of the global Web3.0 talents, employing nearly 75,000 blockchain professionals with 450+ Web3.0 and blockchain startups operating out of India. These figures alone signify the budding web3 ecosystem in India. The Indian IT ecosystem is perfectly positioned to build the web3 and blockchain economy of the future and is poised to play a crucial role in fulfilling the Government of India's vision and mission of 'Make in India' for the world,” Gupta told Fortune India.

“We request an infrastructure status for digital wallet infrastructure service providers so that they can actively contribute towards making India a $5 trillion digital economy,” Gupta added.

Notably, 30% of the current crypto investors fall under the age of 30. Since this is the age when a person starts their journey towards financial planning and stability, experts believe the government should rationalise the 30% tax to foster a thriving IT and web3 ecosystem that will drive innovation and growth in the country. Also, with Institutional investors in the picture, storing digital assets in a secure and compliant way becomes an absolute necessity. India needs professional digital wallet infrastructure companies which are regulated, compliant, and licensed to boost the confidence of retail and institutional stakeholders. 

Tarusha Mittal, COO and Co-Founder, Dapps and Unifarm, said crypto is an essential part of Web3- but the Crypto Bill has been pending for years. Although the tax part has been addressed, Web3, crypto assets, NFTs and the metaverse require a separate Bill for other regulatory matters, Mittal said.

“Recently, Bharat Web3 Association (BWA) has recommended FM to highlight the impact of the existing tax provisions such as TDS, tax on income from VDAs, and not allowing carrying forward of losses on the wider industry and share its inputs on suitable amendments which can help address the concerns of the government and at the same time allow growth of Web3 sector. The government should frame strong regulations for the sector in light of the FTX crisis- especially for centralised bodies dealing with crypto,” Mittal added.

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