Will Nirmala Sitharaman Go Soft on Crypto in Her 2nd Term as FM? The harsh treatment of 30 per cent tax on profit and one per cent VDA coupled with India's decision to not yet ban the currency has left many in a fix. So, what does the coming times mean for crypto players in India

As India concluded its general elections to form the 18th Lok Sabha, the public saw Nirmala Sitharaman assuming the charge of Minister of Finance for a second consecutive time.

This re-appointment has sparked a discussion in the cryptocurrency fraternity and has left the ecosystem divided as to where the future of the alternate currency is headed?

In September last year, Sitharaman under India's G20 presidency spoke about supporting the International Monetary Fund (IMF) and the Financial Stability Board (FSB) for a global co-ordinated approach towards crypto assets. "The IMF and FSB synthesis paper will delve into the policy and regulator frameworks developed by the two alongside the other standard setting bodies that will fit together and interact with each other," she said earlier. The FM had hinted on a need for a synthesis paper in April last year.

The G20 Roadmap on Crypto Assets was approved by the G20 Finance Ministers. "All of us will have to work together on it, otherwise regulating crypto may not be effective," she added.

This led to players advocating for a framework that prioritized investor protection, anti-money laundering measures, and cybersecurity.

The hopeful notification came after a 2022 Union Budget which saw crypto players witness major blows. The budget saw a 30 per cent tax on profits (plus a four per cent surcharge) and one per cent Tax Deducted at Source (TDS).

The Union Budget 2023 and 2024 failed to give the players a relief as no revisions were made despite the advocacy. This resulted in investors fleeing to offshore platforms and deprived the ministry of INR 3,493 crore revenues, as against the collected revenue of INR 258 crore according to the report ''Impact Assessment of Tax Deducted at Source on the Indian Virtual Digital Asset Market.''

At India Today Conclave 2024 in March, Sitharaman dropped a big bomb on the ecosystem by saying "Assets created in the name of crypto can be assets for trading, speculations, money making and other things. We haven't regulated them then, we haven't regulated them now. They cannot be currencies is what I've always held and that's the government of India position also."

This harsh treatment coupled with India's decision to not yet ban the currency has left many in a fix. So, what does the coming times mean for crypto players in India?

Continued industry optimism

Leading players remain hopeful of the government revisiting the TDS, providing regulation and legal clarity, and a need for fertile zones to nurture.

Manhar Garegrat, Country Head - India & Global Partnerships, Liminal Custody Solutions believes that a clear regulatory environment and reducing taxes on crypto transactions to a reasonable level will make the Indian digital asset market more competitive. "We believe the Indian Finance Minister will encourage and foster constructive dialogue with industry experts and policymakers for balanced decision-making about the digital asset sector," he said.

Concurs Abhishek Singh, co-founder and CEO, SecureDApp, "While there are concerns about the regulatory landscape, we believe that with thoughtful policies and open dialogue, India can lead the way in the crypto revolution, ensuring security, transparency, and growth for all stakeholders."

Calling Sitharaman an effective finance minister, Rajagopal Menon, Vice President, WazirX believes that her reappointment signals continuity and stability. "In this term, the government has the opportunity to focus on its core constituency—the middle class. The crypto industry is hopeful that the FM will remove or reduce the one per cent TDS, allow set-offs for losses, and tax capital gains based on income slabs. As India is a signatory to the G20 ministerial declaration, we can anticipate crypto regulations by 2025. We hope that regulations will be in the Goldilocks zone — neither too stringent, nor too lenient. Thus fostering a conducive environment for the industry," said Menon.

Shivam Thakral, CEO of BuyUcoin feels that due to a lack of proper regulation, the cryptocurrency sector in India is far from achieving its full potential. "We hope that she sets in motion a dialogue with market experts and government officials to address the concerns and expectations of the Indian cryptocurrency sector. A high and unrealistic tax burden is a key roadblock in the rapid development of the Indian cryptocurrency market. We hope the Finance Minister will take initiatives to bring down the one per cent transaction tax and 30 per cent capital gains tax on crypto incomes to reasonable levels," he said.

The taxing wrath

While the industry players remain neutral and cordial in their stance, retail investors and crypto and Web3 enthusiasts are expressing their dissatisfaction and concerns.

"The trending hashtag on Twitter reflects public frustration, highlighting the belief that the current administration will not support the crypto sector, continuing with unfavorable tax regulations. While her reappointment is praised for focusing on infrastructure development and exports, it does not bode well for the crypto industry," posted user by the username @alok9811.

Crypto Influencer RK Gupta in mid-May posted "When it comes to crypto.. it's like a GUNDA TAX... 30% flat tax without considering rich or poor, and no loss setoff... one per cent TDS is an arrow that strikes traders xxxx, India Govt., mend your ways... if you truly want to eradicate poverty."

We don't need Nirmala Sitharaman as a Finance Minister ?#Disappointed pic.twitter.com/Ym5FkVIdrv

— Crypto Aman (@cryptoamanclub) June 10, 2024

Crypto Influencer and Youtuber @cryptoamanclub posted "We don't need Nirmala Sitharaman as a Finance Minister #Disappointed."

"As a taxpayer and crypto trader, I find it challenging to manage my portfolio under these conditions," he added.

Several users took to X to express urgent TAX reforms. Budhil Vyas posted "Disappointed as Nirmala Sitharaman continues as India's Finance Minister."

The reforms include ending the one per cent TDS; enabling loss set off; declassifying Crypto as gambling; allowing loss carryforward; and introducing income-based tax slabs.

"Changes are uncertain as taxes are 30 per cent with a one per cent TDS. Not a good news for Indian crypto traders," posted user @VishalSahu21.