The 30% Crypto tax is the Indian government at its passive aggressive best (or worst, depending on your view point).
The text of this tax law coupled with what the finance minister said in the post-budget interview leads me to think that the government holds the crypto ecosystem in absolute disdain.
The crypto exchange promoters are welcoming this move as a recognition bestowed upon them. Obviously, they are choosing to see the slim silver lining.
Truth is this is just one jaw of the vice that is going to be applied on the crypto industry.
The other jaw will likely be when the crypto bill is introduced regulating these exchanges with stipulations such as these:
1. Requirements for KYC registration (not just collecting PAN but registering with KRAs)
2. Limits on the range of crypto assets that can be offered for trade (likely by coin market cap initially and with regulatory approval then on)
3. Possibly, placing qualification limits on investors allowed to invest in crypto (bringing to bear the ‘accredited investors’ concept that SEBI is working on)
4. Severe curbs on how they can be marketed (no celebrities, for example)
In essence, the government would do everything short of banning to ensure that the growth of this industry is significantly tempered.
Why would the government do this? Simple:
1. India is not a big crypto mining country – we don’t have the power capacity to spare.
2. That means most of the crypto assets are ‘imported’.
3. Which means flight of capital and a potential current account problem for the central bank and the government
India already is struggling with gold – another non-productive, imported asset that causes balance of payment issues. Why would they encourage creation of another?