User sign-ups on crypto platforms jumped 30-50% on budget day Tuesday, when the finance minister announced a proposal to tax digital assets.
While crypto investors and exchanges looked for the fine print in the proposal, some viewed the announcement as an indirect way to endorse crypto trade in India. Industry executives said the budget announcement resulted in pent-up interest among risk-averse investors as well as companies who earlier feared the digital assets would be outlawed in India.
In a post-budget press conference, however, finance minister Nirmala Sitharaman clarified that “taxing does not automatically bring legitimacy.” It cannot be said that a ban or not of cryptocurrency is off the table, as consultations are still ongoing, she said.
Data from crypto firms WazirX, CoinSwitch Kuber and Unocoin showed a sharp increase in new users downloading the apps and completing the sign-up process on Tuesday, compared with Monday.
“The spike in sign-ups shows that the majority of people, especially corporates who have been sitting on the sidelines because of uncertainties, will now be able to participate in crypto.
Overall, it’s a positive move for the industry,” said Nischal Shetty, chief executive of WazirX, which saw a more than 50% jump in sign-ups from a day earlier. “The tax clarity is a welcome move,” he said.
No Immediate Effects: Execs
“It is a huge relief to see that our government is adopting the progressive stance of going ahead in the direction of innovation,” said Shetty of WazirX.
On Tuesday, ET reported that the proposed tax rules — a 30% tax on gains and 1% tax deductible at source on every crypto transaction, with no concessions allowed — could hurt active traders in India. But industry executives said the effects of the proposal were not immediately apparent and would only become clear in the coming financial year.
“The negative impact in this case is not immediate as people have some time to respond to it,” said Sathvik Vishwanath, cofounder of Unocoin, which onboarded more than 2,000 users on Tuesday.
“The budget announcement did give some clarity on taxation at least, even though it did not spell out full regulation. The taxation rules have caused many people who were on the fence to jump on to the bandwagon.”
A spokesperson from CoinSwitch Kuber said a 30% jump in user sign-ups on its platform on Tuesday was due to the company’s ongoing investor education initiative, and that it cannot be viewed as a reaction to the budget announcement.
Jumping the gun
After the minister’s budget speech, a handful of crypto company CEOs, social media influencers who work with crypto exchanges, and crypto evangelists claimed that the digital assets had effectively been legalised in India, or could not be banned.
But several legal experts and government officials ET spoke to termed this interpretation as wrong. Minister Sitharaman herself then denied giving any legitimacy to crypto trade.
Still, one of the world’s largest exchanges Binance, which owns WazirX, published a blog post on how crypto was now legal in India. Its founder, Changpeng Zhao, reiterated the claim in a tweet. Binance did not immediately respond to ET’s queries.
Crypto is legally recognized in India, with a 30% tax.— CZ 🔶 Binance (@cz_binance) 1643705329000
Balaji Srinivasan, a former general partner at Andreessen Horowitz who has been actively involved in promoting crypto and blockchain technology in India, also tweeted that India was legalising crypto assets.
🙂 This is why I used the present continuous tense, namely “India is legalizing.” Yes, on the present path some prov… https://t.co/Mf3WQ6kTTD— Balaji Srinivasan (@balajis) 1643716566000
He later posted a clarification saying it was “highly unlikely that they (Indian authorities) are going to veer backward from this announcement towards a ban”.
Meyyappan N, leader – international tax at Nishith Desai Associates, said the government was probably moving towards regulating crypto.
“But I personally don’t think we can say taxing something is a step towards legalising it. They have treated it similar to gambling winnings in my view. It’s not an attractive tax regime, even if it’s clearer (than before),” he said. “I do not read any favourable view on the legality of it based on yesterday’s (Tuesday’s) amendment.”
Read full story on The Economic Times