India's Crypto Economy
India's Crypto Economy is a brand-new weekly newsletter (delivered every Thursday) from Inc42 to help you decode the rapidly growing crypto economy and its implications on business, work and life. We launched this newsletter on the 4th anniversary of our weekly series “Crypto This Week” which completed 190 editions in May, 2021.
With the price of the world’s leading cryptocurrency Bitcoin continuing to surge this month, the Indian government is currently weighing a proposal for levying an 18% goods and services tax (GST) on Bitcoin transactions.
The Central Economic Intelligence Bureau (CEIB), an arm of the finance ministry, has made the proposal to the Central Board of Indirect Taxes and Customs (CBIC). CEIB is a think-tank of the ministry and has conducted a study on levying of GST on cryptocurrencies.
The CEIB proposal says that the government could potentially earn INR 7,200 Cr annually by levying GST on the margins made in the trading of bitcoins alone, just one class of cryptocurrencies.
According to TOI, which first reported the development, CEIB has suggested that bitcoins can be categorised under ‘intangible assets’ class and a GST levy could be imposed on all transactions.
Meanwhile, Indian crypto stakeholders have told Inc42 in the past that they’ve always advised their users to declare their crypto earnings while filing their annual income tax returns (ITR), the deadline for which is December 21, 2020.
“ZebPay has told our members since 2014 that the tax laws always apply to crypto earnings. We advise our customers to declare their income and be compliant,” said Vikram Rangala, chief marketing officer at ZebPay.
Sumit Gupta, cofounder and CEO of Mumbai-headquartered crypto exchange CoinDCX said crypto earnings can be declared as “income from other sources” in one’s ITR.
India has seen a significant increase in cryptocurrency trading volumes this year on domestic crypto exchanges after the Supreme Court, in March, quashed a 2018 circular by the Reserve Bank of India (RBI) which had barred Indian banks from providing services to crypto companies.
However, the regulatory uncertainty for cryptocurrency in the country means that there’s a sufficient grey area for fraudsters to operate.
Earlier this month, a Gujarat Trader was arrested in an INR 1,000 Cr online betting racket linked to a cryptocurrency scam.
This year alone, it was reported that Bengaluru Police was investigating an alleged crypto ponzi scheme which was being run by three companies — Long Reach Global, Long Reach Technologies and Morris Trading Solutions. According to the police, these companies collected at least INR 15K each from over 11 lakh people from across the country to invest in a new cryptocurrency called Morris coin. The police have also arrested a 36-year-old man from the Malappuram district of Kerala who is the CEO of all the three entities.
A similar crypto ponzi scheme was being investigated by Delhi police in September, alleged to have been operated by one Pluto Exchange.
Bitcoin & Ethereum Prices
At the time of writing, Bitcoin was trading at $26,702, a nearly 18% increase from last week’s price of $22,672. Its market cap was $493 Bn.
Ethereum was trading at $715.94, a nearly 20% increase from last week’s price of $598. Its market cap was $81 Bn.
UNICAS Crypto Bank Opens in India
London-based crypto-focussed neobank Cashaa has signed a joint venture with Jaipur-based United Multistate Credit Cooperative Society to launch what it claims to be the world’s first crypto bank called Unicas. The new company will individuals to transact in cryptocurrency and fiat from one account. The joint venture will allow Cashaa access to United’s regulatory licenses, physical branches, and overall banking Infrastructure.
Unicas is initially opening its services online and through 14 branches across Delhi NCR, Rajasthan, and Gujarat by January 2021, and plans to rapidly expand to 100 branches by the end of 2022. Unicas will be providing banking services for both fiat and crypto assets. Services include savings accounts, crypto exchange, crypto loan and debit cards to spend crypto. Users may receive an instant loan digitally by depositing crypto assets in the Unicas wallet and requesting the equivalent value of INR on their card or bank account.
Ripple Lawsuit Worries Indian Crypto Exchanges
A US lawsuit against Ripple Labs Inc., the issuer of the world’s third-largest cryptocurrency, has sent the value of the XRP currency plunging but Indian exchanges have refrained from restricting its trading although they are closely monitoring the case. You can read the full story here.