The upcoming Union Budget is expected to bring transparency regarding regulatory ambiguity related to the cryptocurrency sector. Initial highlights of the recommended crypto bill indicate the SEBI’s role in regulating crypto as an investment asset in capital markets, with the Reserve Bank of India supervising the foreign exchange and wider monetary aspects. Jurisdictional transparency in this regard is crucial.
Apart from setting the base for crypto as a tradable asset, the Budget can create more clarity around its taxation. As hinted by the government, there are schemes to revamp the Income Tax Act to include profits made from transactions in cryptos under the tax net.
In addition to this, the Crypto Bill and the Budget may functionally categorize several operators in the crypto space (token issuers, wallet providers, exchanges, brokerage) and impose differential tax liabilities on the supply side accordingly.
The Budget 2022 may also highlight the requirement for better standards for the verification of reporting mechanisms from crypto operators and investors. Severe regulations regarding including monitoring and reporting of dubious transactions, extra authentication mechanisms and regular audits of transactions are also credible.