Need for crypto-friendly budget, level-playing field

Synopsis

Rajagopal Menon says Indian crypto industry seeks level playing field, stable banking connections, and optimized taxes in upcoming budget. Regulatory measures expected to address TDS reduction, loss tax rule change, and taxation alignment with equity shares. Support for innovation and blockchain development crucial, G20 roadmap to be followed, optimized crypto taxes to boost investor confidence and encourage investment in Indian crypto ecosystem are needed. Closer collaboration between industry and government also needed for balanced regulation and mutual benefits.

Rajagopal Menon-WazirX-1200ETMarkets.com

As India eagerly awaits the budget announcement on February 1st 2024, the cryptocurrency industry is seeking clarity and support for a conducive regulatory environment.

In an exclusive interview with Rajagopal Menon, Vice President of WazirX, a leading cryptocurrency platform in India, key insights into the industry’s expectations have emerged. Menon emphasizes the urgent need for a level playing field, addressing taxation challenges, and fostering collaboration between the crypto industry and the government.

Given the upcoming budget on February 1st, how do you anticipate the budget will impact the overall crypto industry in India? Are there specific strategic areas or policy changes you’re hoping to see to benefit the growth of the industry?

Rajagopal Menon: All the Indian crypto industry is asking for is a level playing field. Foreign exchanges operate in the grey zone of regulatory and tax arbitrage. Indian exchanges lose market share, investors lose legal recourse, and the government loses revenue.


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The second is the ease of doing business. The Indian crypto industry finds it very difficult to operate because we do not have stable banking connections. Indian banks have their own hurdles of associating with Crypto platforms.

As the regulatory landscape for cryptocurrencies continues to evolve, what regulatory measures or frameworks are you expecting or hoping to be addressed in the upcoming budget, and how do you believe they will impact the operational environment for crypto companies?

Rajagopal Menon: We are hoping that the FM will reduce the TDS from 1% to 0.01%. This will continue to enable tracking and tracing of transactions, which would also aid in tax collections. If Indian investors continued to trade from Indian KYC-enabled platforms, this would also be efficient for traders and retail investors.

The no-set-off or carry-forward of losses tax rule must be changed. There is an urgent need to bring taxation on par with equity shares and derivatives by allowing losses to be set off or carried forward. The 30% threshold was established in response to comparisons of digital assets to highly speculative avenues such as gambling and betting. Cryptos are more like securities trading, requiring clear ownership and title of the assets and sufficient liquidity to transact. The current tax slabs will only force large portions of trading to go underground and will discourage and deter risk-taking traders from dealing in cryptos.

Cryptocurrencies are often at the forefront of technological innovation. With the budget around the corner, what kind of support or incentives would you like to see for fostering innovation and the development of blockchain and crypto-related technologies in India?

Rajagopal Menon: Since this is going to be a vote of account rather than a full-fledged budget, we are keeping our fingers crossed that taxes will be optimised. Once the new government takes office, we expect a lot of action around regulation. India is a signatory to the G20 declaration in Delhi, which outlines a clear roadmap for crypto. The roadmap stipulates that all G20 countries must have crypto regulation in place by 2025.

Investor confidence plays a crucial role in the success of the crypto industry. How do you anticipate the budget announcements influencing investor sentiment towards cryptocurrencies, both domestically and internationally?

Rajagopal Menon: Investor confidence is all about sentiment and signalling. If the government were to optimise crypto taxes, it would send the right signal to the crypto community; there will be a wall of money that will return to the Indian crypto ecosystem that has fled the country because of tax. More VCs would be comfortable investing in Indian crypto start-ups, and a lot of developers who have moved abroad could come back. This creates a virtual cycle of more investment, leading to more jobs and a thriving ecosystem.

In light of the budget, how do you see the collaboration between the crypto industry and the government evolving? Are there specific areas where you believe a closer partnership could lead to mutual benefits for the industry and regulatory authorities?

Industry is in constant talks with the government and different government bodies. We hope that when the government frames its regulations, it will take the industry body Bharat Web3 Association into confidence. Together, we can achieve the Goldilocks zone of regulation, where there is a delicate balance between the risks and benefits of different regulatory approaches. This requires a coordinated effort between the government and the industry to ensure that regulations are consistent and do not create unintended consequences.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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