Introduction

Crypto currency has been obtaining worldwide popularity ever since the arrival. However it has been confronting with plethora of barricades in connection with the legitimacy. In this blog, the taxation and legal and regulatory challenges of crypto currencies shall be cultivated.

Meaning of Crypto currency:

Crypto currencies are virtual or digital currencies which are strengthened by cryptography. These are advantageous due to the accessible and accelerated money transaction. These do not require any intervention by any bank or financial institution^[1].

Some of the Crypto currencies are Bitcoin, Ethereum etc.

Crypto currencies are decentralised or non regulatory in India^[2].

The usage of Crypto currency:^[3]

In order to use crypto currencies, a digital wallet is required to be owned by the investors at first, which shall contain the public and private keys. These keys are predominantly used for sending and receiving crypto money.

Also, the investors could use Mining Process, for the above mentioned purpose.

The helm of Crypto currency in the eye of law:

Crypto currencies aren’t synchronised by The Indian Government. In 2018, The Reserve Bank of India demanded for an embargo on Crypto currencies. However such assertion had been annulled at the behest of The Supreme Court. The crypto currencies had neither been proscribed nor had been promulgated to be something legitimate in India^[4].

Therefore, straight after the arrival of the verdict by The Supreme Court (in 2020)^[5] there is no need to worry regarding the expenditure on Crypto in India, despite an erratic regulatory system.

The Imposition of taxation on Crypto currency:

The Finance Minister, Nirmala Sitaraman, addressed crypto currencies as Digital Virtual Assets, in the event of The Union Budget, 2022, which was something unanticipated, as The Indian Government never addressed crypto currencies as virtual digital assets beforehand.

On top of that, regarding the induction of taxes on the virtual digital assets, i.e. crypto currencies, had also been revealed.

Basically an individual, acquiring any type of profit out of such digital assets, i.e. crypto currencies, is liable paying taxes to the Government. The rate is fixed at 30% (as declared during The Union Budget, 2022)^[6].

 All investors are duty – bound to pay crypto taxes, soon as they opt for investing on crypto currencies^[7].

Few of the Crypto Transactions, which are taxed in India^[8]:

• The tax imposition shall take place if goods and services have been purchased via embezzling crypto money,
• When somebody receives crypto currencies in the form of a gift,
• When somebody receives crypto currencies in the form of a payment or remuneration for providing services,
• When crypto currencies are used for permuting with other crypto currencies,
• When someone receives salary or remuneration in crypto currency,

It must be annexed that if the crypto transactions somehow oversteps, then 1% additional tax shall be put on^[9].

All about the crypto challenges:

1. Adverse Effect on Traditional Banking System^[10]

It is something that should be contemplated on. If the concept of Crypto obtains the legitimateness, then a crookedness shall arise during the transaction of these two.

2. The hazard of swindlers^[11]

This is an era of cybercrimes and the same is ubiquitous in our country too. The investors are required to be well aware of the swindlers, while investing on crypto currencies, as these functions digitally, which can smartly be possessed by the swindlers.

3. Money Laundering and other scams^[12]

Money laundering is another crux that might arise due to the ratification of crypto currencies. Also, other illicit transactions might take place along with money laundering. 

In accordance with the examination report, emphasized by Blockchain Research Firm, an increment on misdemeanours regarding the crypto currency transactions had been observed in 2022.

4. Frivolity on the usage^[13]

Another labyrinth is this. People are generally not cautious about the Blockchain Technology and the accurate ways to use crypto money. Also it’s quite troublesome to interpret the precise and mathematical ways of utilising the same.

5. Unalterable transactions^[14]

Simply put, when any persons pays up via crypto currencies, he cannot get the money back in any way, unlike the traditional currencies, which does possess certain regulatory legislations. Wherefore, the investors should take this crux into consideration, before their expenditure.

6. Regulatory Challenges

 Regardless of the induction of taxation, the inferior regulatory manner and the future of crypto is still in the dark for the investors. The investors have been endeavouring for the safeguard of their investment from any type or cybercrime, ever since they had invested. However, The Indian Government is required to cogitate on this matter cautiously so that a regulatory system comes along, which gives a sigh of relief to the investors.

Conclusion

Irrespective of the above mentioned challenges and perplexities, The Indian Government exhibited it’s inquisitiveness on embracing crypto currency at Telengana Web3 Sandbox. Hence, the translucency is perceptible on the future regulatory structure of crypto currencies.

^[1] Coursera Staff, How Does Cryptocurrency Work? A Beginner’s Guide, courser.org (11^th June, 2024, 8:00pm) https://www.coursera.org/articles/how-does-cryptocurrency-work

^[2] Cryptocurrency, drishtiias.com (11^th June, 2024, 8:00 pm) https://www.drishtiias.com/to-the-points/paper3/cryptocurrency-9

^[3]  Ibid

^[4] Justin M Bharucha, How Cryptocurrencies Are Taxed In India, forbes.com (11^th June, 2024, 8:00 pm) https://www.forbes.com/advisor/in/investing/cryptocurrency/cryptocurrency-tax-in-india/

^[5] Advantages and disadvantages of cryptocurency, economictimes.com ( 11^th June, 2024, 8:00 pm) https://m.economictimes.com/markets/cryptocurrency/advantages-and-disadvantages-of-cryptocurrency/articleshow/107916590.cms

^[6] Guide to Crypto Tax in India [Updated 2024], coindcx.com ( 11^th June, 2024, 9:00 pm) https://coindcx.com/blog/cryptocurrency/crypto-tax-guide-india/

^[7] Neeraj Bhagat & Co., Cryptocurrency Taxation in India: Rules and Implications, taxguru.in (11^th June, 2024, 9:00 pm) https://taxguru.in/income-tax/taxation-cryptocurrency-india-rules-implications.html

^[8] Ektha Surana, Taxation On Cryptocurrency: Guide To Crypto Taxes In India 2024, cleartax.in ( 11^th June, 2024, 9:00 pm) https://cleartax.in/s/cryptocurrency-taxation-guide

^[9] Guide to Crypto Tax  in India [Updated 2024], coindcx.com (11^th June,2024, 9:00 pm) https://coindcx.com/blog/cryptocurrency/crypto-tax-guide-india/

^[10] Advantages and disadvantages of cryptocurrency, economictimes.com ( 11^th June, 2024, 9:00 pm) https://m.economictimes.com/markets/cryptocurrency/advantages-and-disadvantages-of-cryptocurrency/articleshow/107916590.cms

^[11] Ibid

^[12] Cryptocurrency in India: Navigate Opportunities & Challenges, choiceindia.com ( 12^th June, 2024, 7:00 pm) https://choiceindia.com/blog/cryptocurrency-in-india/

^[13] Shiva Ghosh, Top 10 Major Crypto Adoption Challenges in 2023, analyticsinsight.net (12^th June, 2024, 7:00 pm) https://www.analyticsinsight.net/cryptocurrency-analytics-insight/top-10-major-crypto-adoption-challenges-in-2023

^[14] Ibid