Crypto tax has provided Indian entrepreneurs further impetus to move out of the country.
What was being seen as a deterrent to crypto adoption is not becoming a boon for the industry.
The recently announced crypto tax regime was seen as an obstacle by crypto exchanges in onboarding new customers.
However, it is turning out to be totally different.
Crypto Tax Attracts New Investors
WazirX, which is owned by Binance, has witnessed 30% growth in daily sign-ups since February 1, when the tax regime was announced, Bloomberg reported.
Its unicorn competitor, CoinSwitch Kuber reported a daily increase of 35%.
“Investors are seeing a lot of clarity and visibility now with taxation announced in the budget,” WazirX co-founder Shetty said in an interview. “Earlier, people were on the sidelines wondering if cryptos were allowed or not.”
Shetty also revealed that the average new user invests INR 30,000 to INR 40,000 ($400 to $533) in their trading account.
This is a lot higher by the figure claimed by the Deputy Governor of the Reserve Bank of India, Mr T Rabi Sankar who claimed that “four out of five investor accounts held investments of less than Rs.10,000, with an average holding size of Rs.1,566.”
Crypto taxation has provided the industry with tacit recognition from the Government. Maybe this is being seen as a positive step by the investors.
In the past few years, fantasy cricket games have proliferated in India. Their users too have to pay around 30% tax. These games are also based on pure speculation.
It could be that just like they have tasted critical success in India, even after having high taxes, crypto may become mainstream.
The coming financial year is crucial for the Indian crypto industry as it will decide the long-term prospects.
Tax Regime Could Hamper Innovation
Last year India added 42 unicorns. In just the first 2 months of 2022, the country has already added 8 unicorns, according to India Brand Equity Foundation. The entrepreneurship wave is taking India by storm.
But the crypto tax regime has provided an impetus for entrepreneurs to move out of the country and register their businesses abroad. Earlier regulatory uncertainty was an issue, coupled with the tax regime now entrepreneurs have another reason.
This could hamper innovation. Crypto is a trillion-dollar market that is not just limited to cryptocurrencies. NFTs, Play-to-Earn, Metaverse, DeFi, etc. are the different segments of the whole crypto industry.
By hindering innovation Indian entrepreneurs could lose out on a trillion-dollar market. Moreover, given India’s supremacy in Information Technology (IT), crypto presents a huge opportunity to be capitalized on.
Crypto tax is quite ambiguous. It is expected to be cleared out during the next phase of Budget Session 2022. As mentioned above, the crypto industry has different segments, will the government tax all of them in the same manner.
NFTs, Play-to-Earn, and many DeFi services are not based on speculation. With that logic, they should not be subject to a flat 30% tax.
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