Cryptocurrency: the new Mario Kart.

After years of dawdling, the Indian Government finally addressed the issue of Cryptocurrency during Budget Session 2022. Nirmala Seetharaman, during the session, declared that a 30% tax tariff will be levied on all income from digital assets. It is obvious now that they don’t want us dabbling in digital currency.

To be fair, the recent fall in the value of Bitcoin and Ethereum shook the entire industry. Both of them have lost 40% of their value since November 2021. Back in June 2021 Elon Musk

allegedly manipulated the price of Bitcoin by tweeting that Tesla won’t accept payment in the form of Bitcoin. Its price fell by more than 7% then. These events have only gone on to prove that cryptocurrencies cannot be treated as real currency.

Before we discuss further, for those of you who don’t understand crypto or buzzwords like

blockchain or NFTs (which honestly makes most of us) watch the linked video that simplifies the whole deal. - https://www.youtube.com/watch?v=1YyAzVmP9xQ (not a promotion)

To put it in layman’s terms, cryptocurrency is a form of decentralized digital code that acts like money. What’s special about it is that it doesn’t need a third-party company to take care of transactions. Thus, there is no auditing and no way to figure out what money went where, it means faster and hassle-free transactions. But it also means that Governments can’t keep a

check on where any of it is going - and that’s not always a good thing. The RBI has on several occasions flagged concerns of money laundering, terror financing, tax evasion, etc with private cryptocurrencies like Bitcoin, Ether, etc

Regardless, it looks like the government is trying to keep up with the trends. They announced the release of Digital Rupee in April 2022 and that is something to be lauded. Not even the USA has done it yet. And they seem to be the flag bearers of every new trend. China and the Netherlands are other prominent countries that have introduced them. This Digital rupee will be a CBDC (Central Bank Digital Currency) which will be based on blockchain technology. According to Indianexpress, the goal is to provide users with convenience and security of digital as well as the regulated, reserve-backed circulation of the traditional banking system. It is speculated that this decision will go a long way in advancing the Indian economy as using digital platforms transcend the limitations of brick and mortar institutions, making all processes go faster and smoother.

Meanwhile, Bitcoin and crypto traders, in general, are left wondering what’s going to happen to them. When it comes to stocks, the Indian government doesn’t levy tax on losses, instead, it only taxes you on your net income. So until you recoup your losses, you won’t be taxed. The same can’t be said for crypto. It was declared that Losses from the transfer of digital assets can’t be set off against any other income and all crypto transactions will be taxed 1% at source. Crypto traders don’t seem to be too concerned though as Bitcoin prices rose by 2% following the announcement. Although the RBI has been working on a phased implementation strategy, It is still unclear as to how they plan on linking all the national crypto service providers with PAN cards and Aadhaar numbers. Traders, at the end of the day, have the option to simply shift to international service providers.

Crypto trading has always been risky, and now with the 30% tax ( if/when implemented), it is

riskier than ever before. And many would say that the expected returns are simply not worth all that risk. The future of cryptocurrency in India is uncertain, so we are just going to have to wait and see. At this point, dabbling in crypto to me personally sounds like playing a nineties Mario Bros game. Where all this crypto is just blocks of code flying around the air that Mario is supposed to jump over. It sounds exciting and enticing, though in this case, if you fall, there is no second chance.

- Aryaki Sekera