If one observes the recent trends, the crypto segment in India has been undergoing challenging times in the near past. This may continue in the near future as well. However, one thing that is clear going by the Central Bank Regulations is that they do not want crypto. At the same time, authorities have ushered in huge taxation. This has virtually reduced crypto transactions in India. On the lines of taxing Virtual Digital Assets (VDA), the union finance ministry had informed that for FY2022-23, direct tax collected by way of tax deducted at source under section 194S of the Income Tax Act, 1961, on payments made upon transfer of Virtual digital Assets, aggregates to Rs 157.9 crore upto March 20, 2023. So in such a challenging environment what is the future of the crypto segment in India as we move into the new year (2024). There are mixed responses as to where the crypto market will head towards in the future in the country.
“From next year it is likely that crypto may attract 18 percent or 28 percent GST in addition to the current 30 percent Income Tax, 1 percent TDS. There are about 10k active crypto investors in India with average transactions size over $1K per month. This active user base has been reduced by 95 percent. In India there are approx 1 million plus high to medium trade active retail equity investors verses about 10k in bitcoin and crypto currency,” remarked Sudin Baraokar - Global AI and Regulatory Technology Advisor.
He says that the capital markets in India have come of age and have crossed $4 Trillion in market cap... “In this context investing locally and through regulated entities is now nation building. It's our country, our wealth, our citizens. Why invest in foreign, unregulated, non-understandable, anonymous, high-taxable stuff. It does not help India. So what are the crypto influencers claiming to promote? Weapons of mass confusion or weapons of mass financial destruction?,” added Baraokar.
However, a few other experts and crypto representatives with whom THE WEEK are positive about its adoption globally and in India. “Crypto adoption is gaining momentum globally, particularly in countries with unstable economies. In nations like Turkey, Egypt, Nigeria, Argentina, Lebanon, and Pakistan, where local currencies are devaluating, bitcoin prices are at all time highs. This increase reflects Bitcoin's intrinsic proposition and a response to high inflation and economic instability in these regions. With a combined population of around 725 million, these countries view bitcoin as a hedge against inflation and a means to preserve savings in the face of declining local currencies,” pointed out Rajagopal Menon, Vice President, WazirX.
This expert further points out that in countries with stable economies, crypto is emerging as an asset class, an alternative to gold. “The potential approval of Bitcoin and Ethereum ETFs later in 2024 could significantly involve institutional adoption. Furthermore, developments in Web 3 applications and Layer 2 solutions, particularly for Ethereum and Solana are optimistic signs. However, the crypto market's trajectory in 2024 will also be shaped by macroeconomic factors and potential regulatory changes, which will influence both its adoption and price,” said Menon.
Experts do agree that the year 2023 was challenging for the crypto ecosystem as it led to the much-needed clean-up. Despite the setback of a widely-used stable coin and an international exchange, the ecosystem continues to persevere and advance. It continues to generate value through the expansion of blockchains and the development of diverse applications in finance and beyond. This broader trend is expected to continue, with various industries exploring innovative applications in the coming year. Additionally, amidst the optimism surrounding BTC and ETH ETF applications, 2024 is poised to witness increased institutional and retail participation,” said Balaji Srihari, Business Head, CoinSwitch.