Let us shift our focus to the 2022 budget session, which, in many dimensions, was revolutionary. The 2022 budget will have long-lasting effects on our economy.
This is a historic infrastructure push. But heed nevertheless needs to be paid to an event that is equally important and is cited to become a milestone in socio-economic decision-making.
From purely the point of view of economics, not deeming cryptocurrencies to be digital assets and levying a 30% transaction tax over their withdrawal are the steps that are much called for. This is despite the fact that cryptocurrencies have failed to entice the interest of many people, the youth in particular.
We should attempt to understand why the government of India and the global community, in general, are progressing with a precautionary approach towards cryptocurrencies. It is important to understand that crypto implies hidden and the cryptocurrencies are all decentralized. There is no involvement of the governments whatsoever in cryptocurrencies.
Currency trading has now breached the USD 7 trillion marks. Crypto evangelists hence have the opinion that government money is characterized by its unstablity. The stability that government money once used to offer is no longer existent.
By no means, this is a recommendation to replace the greenback with Bitcoin or any other cryptocurrency for that matter. It is important to remember here that currency is nothing but a logistical agreement. It governs the transfer of value against a stable entity.
For printing money since the beginning of time, gold has always been the standard. So, it is easy to see that cryptocurrencies fail to serve the purpose of money.
When compared to a dollar, a Bitcoin features far too much versatility. This makes Bitcoin disastrous for the people who intend to offer products or services in exchange for money.
Just as an instance, imagine that one sells his home for a Bitcoin which can buy three sedans. The next day, the value of Bitcoin deteriorates and can only buy you a cup of coffee. So, it would be like one sells his home for a cup of coffee.
If one is looking for supply or stability, only money can offer that and cryptocurrencies can’t. In terms of supply, Bitcoin is a failure, and hence its prices are also volatile. Cryptocurrency is hence not suitable to serve as money. The government has taken a stand to not define cryptocurrencies as a digital asset. This is logically and technically true. Cryptocurrencies are not a digital asset.
But, cryptocurrencies are still being marketed as the future currencies. They key intention of cryptocurrency operation is to finish of accountability and traceability in economics. So it may appear like cryptocurrencies are revolutionary in the terms of decentralization. But, the power is yet to be transferred from the government to the users. The cryptocurrencies are instead aiming to completely blackout democratically elected governments from tracking financial activities.
This is a loophole that withholds the potential to sabotage transaction regimes. Nevertheless, the loophole shields a range of illegal activities, including terrorism, cybercrimes, human-trafficking, money laundering, extortion and narco-terrorism. It will come by as premium tool using which, terrorists and criminals can mobilize their infrastructure. They will operate with no fear of being tracked by law enforcement agencies.
It is only when one fails to recognize the role of money in economics that crypto sounds fascinating.
In case the US Dollar was to replace crypto, the US economy will crash. Additionally, the world’s economy will also crash because dollar is the global reserve currency.
Cases like Africrypt have also occurred. Here, two brothers went absconding with Bitcoin worth $3.6 billion derived from their platform users. Lack of accountability is hence an absolute disaster. It dilutes trust, which is the very basic of currencies.
If one is an unsuspecting youth, then the 30% tax rate is not going to sound all that great. But over banning cryptocurrencies entirely, 30% tax rate over crypto transactions is a smarter move still.
MNCs and countries such as El Salvador accept cryptocurrencies. But this does not approve the feasibility of cryptocurrencies. This is no trust indicator for cryptocurrencies. One has to put these governments out of the equation. .
Dismantling of the basics of economics takes place at times. But at the cost of unlawful activities, this cannot take place. Levying 30% tax on cryptocurrency transactions is a wise move. But, this decision, too, has been delayed. It should have been made earlier. But now that this decision has finally been made, people from India should welcome it with open hands.
A perspective on new cryptocurrency regulations in India
With the Union Budget 2022, we found the much anticipated clarity on how digital currencies are going to be taxed in India. Across the past few years gone by, cryptocurrencies have found widespread popularity across India.
We have over 10 crore cryptocurrency investors in India, and for digital tokens, India is one of the largest markets in the world. Investors have long been looking for a tax framework that regulates the virtual currency investments.
As per the 2022 Union Budget, transfer of all cryptocurrency or virtual currencies will be taxed at 30%. Herein, no deductions will be allowed except the cost of acquisition. In case there are losses in the transaction, they shall not be allowed to be carried forward.
This is the proposed section 115BBH. This section states that when the total income of the assessee includes any income from the transfer of virtual digital, then the payable income tax will be the aggregate of the amount for the income tax calculated, on income of transfer of any virtual digital asset. This will be calculated at the rate of 30%. Also included in the income tax will be the amount of income tax that the assessee would have been charged if the total income of the assessee had been reduced by the aggregate of the income from the transfer of virtual digital asset. The Union Budget memorandum had stated the aforementioned.
It is noteworthy that following the passage of the Union Budget in the Parliament, the tax proposals will be in effect starting April 1. RBI will also launch a ‘Digital Rupee’ based on blockchain technology in 2022-23.
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