Interpretation of India’s Tax New Deal: Helping to Legalize Cryptocurrencies

Earlier this week, Bloomberg reported that the Indian government is trying to implement a new tax policy for cryptocurrency transactions.

The Indian financial authorities will classify Bitcoin and cryptocurrencies like Ethereum as intangible assets and will impose an 18% tax on encrypted electronic currency transactions, which will be implemented and supervised by the Indirect Tax and the Customs’ Central Committee.

Due to the growing regulatory demand for cryptocurrency, as early as July 1, 2017, local financial institutions planned to implement this newly drafted tax policy for cryptocurrency transactions, and acknowledged that relevant companies and investors in the field of local cryptocurrencies regulated Concerns about the lack of transparency and certainty are increasing.

It is not yet clear whether India will require traders to pay capital gains taxes or pay taxes regardless of the outcome of the investment. In other regions such as the United States and France, traders only need to pay capital gains tax on their profits from cryptocurrency investments, but they do not pay taxes when buying, storing, and selling cryptocurrencies.

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The significance of this policy

Since 2015, Indian authorities have shown mixed views on the cryptocurrency field: several ministers have described Bitcoin as a scam, while others have acknowledged the potential of cryptocurrency and blockchain technology.

Taxation policies on cryptocurrency transactions and the classification of cryptocurrencies such as Bitcoin and Ethereum as intangible assets will essentially legalize cryptocurrency in India.

Just last month, the Reserve Bank of India (Indian Central Bank) issued a statement demanding that companies regulated by the bank stop processing cryptocurrency-related businesses, which caused controversy in the Indian cryptocurrency market.

“It has been decided that from this day on, entities regulated by the Reserve Bank of India shall not handle or provide any services involving venture capital for individuals or businesses. The supervised entities that have provided such services shall cease their services within the prescribed time. The notice will be issued separately,” said the Reserve Bank of India.

In response, Unocoin, the country’s largest cryptocurrency exchange, clarified that they did not receive any notification from local banks asking them to stop their services.

“Please note that the notifications issued did not address the legitimacy of cryptocurrencies, so the legal status of Bitcoin or other cryptocurrencies in India remains unchanged. The decision of the Central Bank of India is more in line with its earlier cryptocurrency-related risks,” said the Unocoin team.

Tax policy may mean legalization

India’s cryptocurrency exchanges such as Unocoin, Coinsecure, and Zebpay have started to supervise their own platforms since 2014. Despite India’s lack of relevant regulations, these exchanges still insist on strict compliance with customer (KYC) and anti-money laundering (AML) policies.

If the Indian government officially formalizes cryptocurrency as an intangible asset, it will legalize the cryptocurrency market in India. Analysts believe that this market has the potential to compete with key markets such as Japan and South Korea, and will rapidly develop and keep pace with other leading regions. The index growth rate.

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