The demise of FTX looks to have put an end to the sector, even though the collapse of Terra back in May triggered intense debates over the type of laws that should apply to India’s virtual asset market.
The relevant agencies are expected to impose even stricter laws soon, and hitherto unrecognized areas like NFTs and the metaverse may come under closer investigation. Nirmala Sitharaman, India’s finance minister, stated at the Indian Council for Research on International Economic Relations (ICRIER) that one of the country’s primary goals for its G20 presidency is to regulate digital assets.
Given the potential for the asset to be used in the financing of terrorism and drug trafficking, Sitharaman further stated that clear rules were in India’s best interests. Along with the government, chief executives of companies that deal in digital assets have been pleading for regulatory clarification in the wake of the FTX collapse.
“Many market participants are desperately seeking more regulatory predictability and clarity. New standards, norms, and laws are required as a result, according to Raj A Kapoor, CEO of the India Blockchain Alliance.
CEO of MuffinPay, Dileep Seinberg, advocated for consistency in incoming regulations so that “cryptocurrency players will know their boundaries and have clear instructions for the operations.”
Data from KuCoin’s “Into the Cryptoverse India Report” survey noted that one-third of India’s virtual currency investors are concerned about the severity of the incoming regulations. This is coming on the heels of India’s notoriously stiff tax policy that charges 30% plus a surcharge on the profits made from trading digital currencies.
Despite a streak of a hard outlook towards digital assets, distributed ledger technology (DLT) enthusiasts can heave a sigh of relief because India has tilted favorably to the offering. Sitharaman revealed that the country was targeting DLT adoption rates of nearly 50% before 2030 and may be relying on it to create its central bank digital currency (CBDC).
A rocky relationship with digital currencies
Apart from the tough tax regime imposed on the asset class, other pointers indicate India’s frosty relationship with digital assets. One of which is the consideration of a blanket ban over the entire industry similar to the one imposed by China.
The move to ban virtual assets was championed by the Reserve Bank of India (RBI) because it could negatively affect the country’s economy while citing the scarcity of investor protection mechanisms in the industry.
A government panel proposed a jail term of up to 10 years for individuals dealing in digital assets, but the recommendation was not implemented. In 2020, the country’s Supreme Court overruled a 2018 order from the RBI that banned banks and other financial institutions from facilitating virtual currency transactions.
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