Bitcoin Still Too Small in India to be Regulated
Cryptocurrency exchanges in India are bullish on the adoption of bitcoin and other digital currencies in the country. But many don’t believe the market is large enough for the Reserve Bank of India (RBI) or the Ministry of Finance to intervene and regulate yet. Companies belonging to the ecosystem also believe that the increase in volatility may attract more people to cryptocurrencies.
Capital Gains and Tax Evasion
In early December 2017, the Indian Income Tax Department reportedly conducted surveys of cryptocurrency exchanges across the country. A few days later, an announcement was made stating that close to half a million high net worth individuals would be sent notices for tax evasion.
India, like most other countries, classifies profit made from cryptocurrency prices as capital gains and expects its citizens to follow relevant tax legislation. The enforcement of taxes in the cryptocurrency industry has always been a murky territory for any government though.
The CEO of Coinome, Vivek Francis, believes that it is likely that the volatility in the cryptocurrency market will ramp up even further given the massive influx of new investors looking to make a quick profit. Indeed, a few years ago, it seemed as if only those interested in the core technology of bitcoin would make any significant investment.
Today, however, with the mainstream media covering the success of cryptocurrencies, a lot more people are being drawn towards them, increasing their prices even further.
Following in China’s Footsteps?
Even though the RBI has released numerous advisories in the past, including one in December 2017 that claimed bitcoin and other cryptocurrencies were a Ponzi scheme, neither it nor the government has taken any additional steps to regulate the market.
While this is good news for digital currency investors in the country, India could quickly follow China’s footsteps and forcefully shut down all exchanges, effectively stomping out the easiest way for most investors to trade cryptocurrencies.
The Indian government is unlikely to criminalize the holding and trading of cryptocurrencies, especially now that world leaders such as Japan and Germany have already embraced their use as legal tender, with the United States only recently announcing the launch of bitcoin futures in November 2017.
Interestingly, however, the RBI does not seem too keen on allowing the digital cash to be used as legal tender in the country, as is evident from numerous press releases discouraging their use.
In contrast to other international exchanges, those situated in India are continually trading at a significant price premium. According to the CEO of Cashaa Kumar Gaurav, this is because of the low trading volume in the country. Even nearly a decade after the release of bitcoin to the public, the adoption rates or public interest in cryptocurrencies is nowhere near that of other nations.
The future of cryptocurrencies in India has always persisted in a state of limbo, and while the government might currently not have much motivation to move against it, legislation may quickly be introduced if the rate of investor interest continues to increase.