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The popularity of Cryptocurrency is in the air! But is it a currency, an asset, or a commodity? The fact that it has an intangible framework, up until now there has been no regulation that existed to such a model. It is known that mining is in the hands of individuals, and neither the Government nor the Central Bank issues it. Then the question arises as to who has the authority to regulate it.
The Purpose of Cryptocurrency
The grounds for this innovation stood not based on trust but rather the willingness of the parties involved in the transaction to directly transfer without a need for a trusted party. The electronic system of payment with the cryptographic proof itself stands by its agenda.
Technically there are no such rules in the crypto zone but the interest of the governments to regulate such a system poses challenges.
Firstly, to believe that computer code is a form of money is incomprehensive and a big change in itself, calls for a paradigm shift. This decentralized system is a collection of binary data that imbibes a deep thought in the minds to even accept, as it has to strike the traditional belief system.
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The Setback of not being Regulated
In the odds of it not being regulated, the currency is vulnerable to threats like cyberattacks, illegal transactions, and settling of payment issues in situations like loss of deposit. Though the decentralization system turns out to be transparent, threats can put one in disguise.
Digital asset technology has come under discussion for scams and might have questioned the Government of its reliability which was a matter of fact back in 2018. The Reserve Bank of India, had even banned financial institutions from dealing in such exchanges.
Later the Supreme Court of India overturned the decision due to the lack of evidence regarding the subject claimed by RBI in 2020. Although the Indian Government shows interest in exploring blockchain technology.
Tax is Tax, still Figuring out the Regulation Aspect
The Cryptocurrency Bill was passed in 2021 but is being delayed to take significant action. When Cryptocurrency just came into the act recently, there was no Income Tax imposed on it earlier, but since 2021, the tax has been a part of it. It has been considered as a currency or a tender by the Income Tax Act 1961 and based on which the tax rules have been implied. And here’s how it looks:
- As a part of the income, the investors are required to report the losses and profits incurred through Cryptocurrency.
- On transferring any digital assets, the earnings are charged with 30% tax.
- If the threshold limit is crossed, the buyer is charged 1% TDS in their payment.
- And if the cryptocurrency is gifted then the giftee has to pay the tax.
- The profits are called Capital gains and regardless of whether it is long-term or short-term, it is taxed at 30%.
- Mining cryptocurrency is treated as a business activity.
- Cryptocurrency is also applicable with a GST of 18% and it is levied on the fees charged on the exchanges.
Why do you Pay Taxes?
The Skeptical Look of the Cryptocurrency
The interest from the Government to look into the regulation aspect is certainly there but how to regulate something that is intangible requires sufficient knowledge of every inch of the subject matter. It is only effective if there is an international collaboration to evaluate the benefits and risk side of the technology as it aids in a global transaction. It’s obvious that the unregulated system is not so favorable despite the demand as it is more prone to risk and the investor is on their own in this regard in the decision to invest in such a market.
Well, soon the Government has to come up with a regulatory framework that is favorable to all. But must say the potential of crypto technology is massive if adequately explored.
Either way, how do you view the Crypto Market?
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