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India’s First Crypto Unicorn Battles for Tax Reform

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The cryptocurrency landscape in India has undergone a seismic transformation since the contentious introduction of the Tax Deducted at Source [TDS] in 2022. In the wake of dwindling digital asset transactions, prominent figures within the industry have raised concerns. Sumit Gupta, the CEO of CoinDCX, India’s first crypto unicorn, has emerged as a leading advocate for lobbying the government for a reduction in the TDS rate from 1% to a mere 0.01%.

The previous year witnessed the implementation of a flat 30% tax on all crypto income in the nation, coupled with the imposition of a 1% TDS on crypto trades exceeding 10,000 Indian rupees [approximately $122]. Shockwaves from these tax measures were felt across the cryptocurrency landscape, prompting an estimated $3.85 billion in capital to migrate from domestic centralized crypto exchanges to foreign counterparts between February and October 2022, all in an effort to evade the tax burden, as reported by the Indian think tank, Esya Centre.

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In a previous interview, Sumit Gupta argued that reducing the TDS rate to 0.01% could yield a win-win scenario. Firstly, it might entice traders back to Indian exchanges, aligning with the government’s objective of tracking virtual digital asset [VDA] transactions to combat money laundering. Secondly, it would contribute to the country’s tax revenue. Gupta further advocated for the tax treatment of crypto trading on par with other asset classes, such as equities.

Indian Crypto Exchanges: The Future

CoinDCX, valued at over $2 billion, plays a pivotal role as a founding member of the Bharat Web3 Association, an industry lobbying group. This collective has been actively advocating for clarification of the legal status of digital assets and the allowance of crypto traders to offset losses against other investment gains for tax purposes.

Despite these efforts, Nischal Shetty, the CEO of the WazirX exchange, cautioned that a transition to a more lenient crypto tax regime in India might still be a couple of years away. Shetty explained, “I don’t think we’ll see any immediate reduction in TDS since there have been no formal discussions between the industry and lawmakers specifically around it.”

India’s stance on cryptocurrency appears to be poised for transformation, as articulated by the Finance Minister. Ajay Seth, Secretary of the Department of Economic Affairs, announced during the recently concluded G20 leaders’ summit that “India’s approach to crypto will be determined in the coming months.”

He underscored that the G20 had established a framework for assessing risks, and India would base its policy decisions on the global consensus forged by world leaders. The crypto landscape in India stands at a crossroads, with the future direction hanging on the balance between taxation and industry growth.

India’s Crypto Future: A Decisive Turn Ahead

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India’s stance on cryptocurrency is set for a transformation, as affirmed by the Finance Minister. Ajay Seth, Secretary of the Department of Economic Affairs, revealed this during the recently concluded G20 leaders’ summit. “India’s approach to crypto will be determined in the coming months.” He emphasized that the G20 had established a framework for assessing risks, and the country would base its policy decisions on the global consensus reached by world leaders.

This announcement carries significant weight given India’s history of stringent measures against digital assets, including a 30% tax rate and a “shadow ban” that led to local payment processors cutting off banking access to crypto exchanges, among other regulatory actions.

Prime Minister Narendra Modi has earlier stressed that cryptocurrency regulations should extend beyond the boundaries of a single nation or group. “The focus should be on adoption, democratization, and a unified approach,” he added. Despite India’s reservations about cryptocurrencies, Modi has indicated that the discussions now encompass broader macroeconomic implications, moving beyond concerns solely related to financial stability.

The other day, India hosted the eighteenth G20 meeting in New Delhi, garnering attention from crypto enthusiasts. The release of a joint policy paper called the “synthesis paper” by the International Monetary Fund [IMF] and the Financial Stability Board [FSB] warned against blanket bans on cryptocurrencies, recommending instead targeted restrictions and sound monetary policies to mitigate associated risks.

India: What Can Crypto Investors Anticipate?

Reports indicate that the nation may not necessarily introduce its crypto regulations in the form of a bill. A complete ban, a stance previously advocated by the Reserve Bank of India [RBI], also appears less likely, as the government has earlier distanced itself from such a possibility and also indirectly contended that a complete ban on virtual assets won’t be the solution in the latest “synthesis paper.”

India has now made the formulation of global crypto regulations a priority during its G20 presidency, as evidenced by the “synthesis paper” from the IMF and FSB. Besides, the recent media statements from the finance ministry indicate a shift towards greater transparency and mark the beginning of a new era in the country’s crypto landscape.

Coinbase’s Cryptic Clarity: Indian Operations Unscathed

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Coinbase, one of the world’s leading cryptocurrency exchanges, recently found itself amidst a swirl of controversy as reports surfaced suggesting that it would soon cease all operations for its Indian customers. However, the situation appears to be more nuanced than initially portrayed.

A spokesperson from the exchange promptly issued a clarification, affirming the company’s commitment to the Indian market. They stated, “We are committed to India over the long term and will continue to explore ways to strengthen our presence in this important market.”

The confusion arose from an email notification sent to certain Coinbase India users, warning them of service discontinuation by September 25 and urging them to withdraw any remaining funds. It is crucial to note that this notice was not intended for all Indian customers but rather targeted those who were allegedly breaching the exchange’s standards.

The email explicitly stated, “We will be discontinuing all Coinbase Retail services linked to your above-mentioned account, as we will be disabling access for the retail accounts that no longer meet our updated standards for these services.” Additionally, it clarified that access to Coinbase Cloud services would remain unaffected.

The spokesperson reiterated that the email was sent only to a subset of account holders found to be in violation of the exchange’s updated standards. They explained, “During a recent routine review of our systems, some accounts may have been identified that no longer meet our updated standards. We will therefore be disabling these accounts, and allow customers to update their information at a later date.”

Importantly, the exchange reassured affected users that their funds remained safe, allowing them to withdraw their balances and transfer them to other cryptocurrency service providers until September 25.

Challenges Faced by Coinbase in India

While reports of Coinbase halting new user sign-ups in India have been circulating, this measure was implemented in June and exclusively impacts exchange accounts, not Coinbase Wallet users. The company emphasized its commitment to the Indian market and ongoing efforts to strengthen its presence.

Coinbase initially launched in India in April 2022 but faced regulatory challenges just days later when it halted payment services through the United Payments Interface (UPI) due to local regulatory pressure. Subsequently, Indian users could only trade existing crypto assets through peer-to-peer (P2P) trading. Presently, Indian users on Coinbase can only access their existing crypto assets.

In conclusion, Coinbase’s recent clarification sheds light on a situation that was misunderstood by many. While it did issue warnings to certain Indian customers, it was not a blanket suspension of services but rather a targeted measure aimed at those not meeting the exchange’s standards. Coinbase remains committed to India and continues to explore ways to solidify its presence in this dynamic and evolving market.

G20 Summit Preps For Crypto Regulation Talks Under India’s Presidency

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In a pivotal development on the international crypto stage, G20 member nations, led by India’s current presidency, have united in their call for global cooperation in regulating crypto assets. The spotlight now shines on the upcoming G20 Summit scheduled for September 9-10, where discussions surrounding crypto regulation are poised to take center stage.

According to a recent report, India’s Finance Minister, Nirmala Sitharaman, officially confirmed the ongoing negotiations for a comprehensive global framework for crypto regulation on September 5. This groundbreaking revelation sets the stage for one of the most crucial topics to dominate the G20 Summit as the world’s economic powerhouses converge to chart a collective course in cryptocurrencies.

Sitharaman stressed the inherent cross-border essence of crypto assets, underscoring the critical demand for a universally adopted regulatory structure. Despite being in the early stages of formulating crypto regulations during India’s G20 presidency, the crypto community eagerly awaits precise guidelines for governing the crypto domain. She remarked,

India’s (G20) presidency has put on the table key issues related to regulating or understanding that there should be a framework for handling issues related to crypto assets.

G20 Nations Diverge On Global Crypto Regulation

The move towards global crypto regulation is poised to address a pressing need felt across the G20 spectrum. Countries like the United States, Australia, and the United Kingdom have witnessed surging demand for cryptocurrencies, creating a growing imperative for consistent and coherent regulation.

However, strict regulations and government apprehension have marked India’s stance on crypto. High taxes and a skeptical outlook have shadowed the industry’s potential within the country. Many have argued that these restrictions have stifled innovation and hindered India’s ability to harness cryptocurrencies for economic development.

Despite this, India has displayed significant interest and activity in Web3 and blockchain technology. As an encouraging sign of forward-thinking in this space, OKX, a prominent crypto exchange, recently announced its plans to enter the Indian market. The company intends to hire local talent and explore the vast potential that India holds in the evolving landscape of Web3.

The collaborative effort among G20 nations to forge a common understanding and approach to crypto regulation signals a turning point in the global crypto narrative. With the G20 Summit just around the corner, the world waits in anticipation for the outcomes that will shape the future of cryptocurrency on a global scale.

Related Reading:| Crypto Regulation: How The 2024 Election Could Shape SEC’s Stance

India’s NPCI Seek Blockchain Expertise in Revolutionizing Payment Systems

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While India maintains a cautious approach towards cryptocurrencies, the nation remains open to the possibilities offered by blockchain technology. Recently, the National Payments Corporation of India [NPCI], an umbrella organization overseeing all retail payment systems and led by the Reserve Bank of India [RBI], has actively embarked on a search for a seasoned blockchain technologist. This individual will play a pivotal role in exploring the potential of blockchain technology within modern payment systems.

Demonstrating their commitment, NPCI posted a job listing on LinkedIn for the position of Head of Blockchain. The primary mission of this role is to identify opportunities where blockchain-driven solutions can be harnessed in collaboration with both internal and external stakeholders. Following the proof of concept [POC] phase for identified areas, the selected candidate will be responsible for the comprehensive design and implementation of a blockchain-based network.

The ideal candidate should possess a minimum of sixteen years of total professional experience, with at least six years dedicated to hands-on development and implementation of blockchain solutions. Additionally, they should have a deep technical understanding of various blockchain platforms and prior involvement in at least two pilot blockchain projects.

At the time of writing, NPCI’s job posting had attracted over 200 applicants, indicating the increasing momentum of NPCI’s blockchain recruitment drive as viable blockchain use cases come to light.

On August 29, NPCI introduced “Falcon,” an open-source project designed to simplify the management and utilization of blockchains based on ‘Hyperledger Fabric,’ with support for Kubernetes clusters. Falcon is poised to empower developers to innovate on blockchain-based payment solutions, facilitating efficient, reliable, and automated deployment of networks and Web3 solutions.

India’s Crypto Stakeholders Urges Policyholders To Lift Shadow Ban

In another development, the newly formed crypto policy advocacy group in India, the Bharat Web3 Association [BWA], has appealed to the government and central bank to restore access to the widely popular real-time payment system, the Unified Payments Interface [UPI], for the crypto industry. This marks a significant push by India’s crypto stakeholders seeking policy changes in the growing industry, following challenges such as heavy taxes, a crypto winter, and a “shadow ban.”

The shadow ban resulted in Indian payment processors severing banking access to crypto exchanges, coinciding with the suspension of UPI services around the same time last year.

Crypto Carnival: Indian PM’s Vision Sparks Global Crypto Unity

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In an era characterized by rapid technological advancements, the question of regulating cryptocurrencies has emerged as a pivotal global concern. India’s Prime Minister Narendra Modi has articulated a visionary perspective on this matter, emphasizing the need for a comprehensive international framework that transcends geographical boundaries and caters to the diverse concerns of both developed and developing economies.

Speaking recently to Business Today, Prime Minister Modi underscored the undeniable reality of technology’s swift evolution. Rather than resisting or evading this change, he advocated for a strategy centered around acceptance, inclusivity, and a unified strategy. “The focus should be on adoption, democratization, and a unified approach,” he stated emphatically.

Modi’s perspective extends beyond India’s national interests. He argued that the regulations, norms, and structure governing cryptocurrency should not be confined to the jurisdiction of any single nation or group. Instead, he highlighted the necessity of a global consensus-based model, drawing parallels with the field of aviation. The world’s aviation sector is guided by common rules and regulations, transcending borders for the sake of safety and efficiency.

As the current holder of the G20 presidency, India has taken decisive steps in shaping the discourse on cryptocurrency. Modi emphasized that the dialogue has expanded beyond concerns of financial stability to encompass broader macroeconomic implications. Recognizing the unique challenges faced by emerging markets and developing economies, the G20 has worked towards consensus and shared understanding. This collaborative approach has culminated in a series of seminars and discussions, enriching insights into the realm of crypto assets.

Crypto-Driven Roadmap: India’s Proactive Global Engagement

India’s proactive engagement in the global conversation on cryptocurrency regulation was manifested through its “Presidency Note as an input for a Roadmap on Establishing a Global Framework for Crypto Assets.” This document reflects India’s commitment to fostering a harmonious regulatory environment that accounts for the diverse needs of nations.

Moreover, the Financial Stability Board’s (FSB) proposed guidelines for a global regulatory framework for digitalassets and the G20’s unanimous stance in April emphasized the undeniable necessity of a transnational approach. As Modi aptly pointed out, the regulation of cryptocurrency cannot be an isolated endeavor; it requires the concerted efforts of nations worldwide.

In the face of this crypto-centric future, Modi’s perspective offers a compass for international collaboration. By embracing technology, advocating for democratization, and championing a global regulatory consensus, India’s Prime Minister is steering the world towards a more unified, secure, and inclusive digital economy. The evolving saga of cryptocurrency regulation, under the aegis of leaders like Modi, promises to be a defining chapter in the global narrative of technological transformation.

India’s Corporate Titan Ventures into Blockchain & CBDCs

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India’s foremost corporate powerhouse, Mukesh Ambani-led Reliance Industries, is making a bold leap into the world of blockchain and central bank digital currencies [CBDCs], as revealed by the chairman, who is also Asia’s wealthiest individual.

Reliance’s ambitious financial services wing, Jio Financial Services [JFS], forged a major partnership with BlackRock [BLK]. This alliance marks the company’s entry into the financial sector. Known for its pivotal role in India’s digital growth narrative, the firm’s latest move into CBDCs and Blockchain was unveiled at its annual flagship event, the annual general meeting.

Speaking on the development, Chairman and Managing Director Mukesh Ambani stated,

JFS is set to revamp payment infrastructure, offering a comprehensive solution for both consumers and merchants, thereby propelling the nation’s digital embrace. Our products at JFS will not only challenge the current industry standards but will also pioneer groundbreaking features such as blockchain-based platforms and CBDC. Our commitment remains unwavering in upholding the highest security standards, adhering to regulatory norms, and ensuring the utmost safeguarding of customer transaction data.

While another arm of Reliance, Reliance Retail, the nation’s largest retail chain, initiated the acceptance of India’s digital rupee, or CBDC, during its pilot phase in February 2023, today’s announcement underscores a deeper interest in this domain.

India has already made substantial strides towards introducing both wholesale and retail CBDCs and is awaiting a comprehensive rollout.

The development coincided with Indian Prime Minister Narendra Modi’s recent comments at the G20 summit. Modi called for a global crypto framework, adding that the nation is doing its part in a crypto regulatory conversation. 

“India’s G20 presidency expanded the crypto conversation beyond financial stability to consider its broader macroeconomic implications, especially for emerging markets and developing economies. Our presidency also hosted enriching seminars and discussions, deepening insights into crypto assets.”

India On The Move

In an interview with a local news outlet, Modi spoke about the role of emerging technologies such as blockchain and cryptocurrency. He noted that the nature of such emerging technologies will have a global impact. Thus, the rules, regulations, and framework around it should not belong to one country or a group of countries.

Indian authorities will soon enable their citizens to sign documents digitally through crypto tokens to secure transactions as part of a project to develop a national web browser. On August 9, the Ministry of Electronics and Information Technology [MeitY] announced the Indian Web Browser Development Challenge.

India’s Giant Leap: Imagine Crypto-Enabled Digital Signatures…

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In an exciting development, Indian authorities will soon enable their citizens to sign documents digitally through crypto tokens to secure transactions as part of a project to develop a national web browser. On August 9, the Ministry of Electronics and Information Technology[ MeitY] announced the Indian Web Browser Development Challenge.

It challenged programmers to build a native web browser using a Controller of Certifying Authorities [CCA] India root certificate. Organized by MeitY in association with CCA and C-DAC Bangalore, the IT ministry intended to “inspire and empower” startups and developers from all over the nation to include the capability of digitally signing documents using a crypto token that would be embedded into the browser.

The tournament will involve three rounds, according to a release. There will be a cap of 18 competitors in round one and eight participants after round two, with the winner receiving about $411k [34 million Indian rupees]. Since the announcement went public, over 200 participants have filed their names, including individuals, government agencies, academic institutions, businesses, and more.

Earlier, the IT department explored ways to leverage Web3 by building a native blockchain infrastructure. In fact, it updated its blockchain strategy in late 2021 and has been working on a project since June 2022.

India Building National Blockchain Infrastructure

Inspired by its global counterparts such as Europe’s EBSI and, to a lesser extent, the domestic arm of China’s Blockchain-based service network [BSN], India’s project is called the Unified Blockchain Framework.

It intends to provide a blockchain-as-a-service architecture by alleviating developers’ concerns about the labor-intensive process of setting up blockchain nodes, their security, or their interoperability with other blockchains. Additionally, it will offer sample smart contract templates for a range of use cases.

Recently, India’s Digital Personal Data Protection Bill 2023 cleared a major hurdle after receiving the green signal from the lower house of Parliament and is now pending approval in the upper house. The bill, a product of over five years of negotiations between the government, technology entities, and representatives of civil society, lays out the rules for how businesses and the government can gather and utilize data about Indian individuals.

India Inches Closer To Implement Controversial Data Privacy Standards

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India’s contentious Digital Personal Data Protection Bill 2023 got the go-ahead signal from the lower house of Parliament and is now pending approval in the upper house. The bill, a product of over five years of negotiations between the government, technology entities, and representatives of civil society, lays out the rules for how businesses and the government can gather and utilize data about Indian individuals.

Given India’s fast-rising internet user base, the passing of the bill is considered significant. Moreover, the world’s most populous nation is positioning itself to address the growing issues around the data gathering and usage practices of AI technologies, which have come under increasing attention globally.

Some of the key takeaways:

The bill covers the processing of digital personal data that is gathered in India, whether it be online or offline, and is then converted to digital form. Data fiduciaries will be required to keep data accurate and secure and delete it once its purpose has been served.

In particular, big tech companies must now acquire government approval before gathering consumer data and are explicitly prohibited from utilizing this data for reasons beyond the limits of the agreed-upon contracts, including selling personal information for AI training.

Additionally, the central government may exempt government agencies from the application of the provisions of the Bill on the grounds of national security, public order, prevention of offenses, etc. Establishment of the Data Protection Board of India to adjudicate on non-compliance with the provisions of the Bill.

India’s Crypto Proponents Say The Bill Is Incomplete

It is to be noted that the legislation has undergone numerous revisions over the years. The earlier version of the bill received harsh criticism, particularly from crypto lobby groups, who claimed it was unable to concentrate on the difficulties that blockchain technology faced.

Regarding the most recent one, Kashif Raza, the founder of Bitniing, a crypto education firm, stated that the public blockchain was not taken into account when the law was being drafted. He emphasized the stringent rules under the Data Controllers and Processors clause.

There are strict guidelines for data controllers and processors. In a public blockchain, there is no single data collector, and the data collected is forever.

Previously, India’s central bank, the Reserve Bank of India [RBI], urged banks to concentrate on Blockchain and AI to be future-ready at a recently organized conference.

The deputy governor of the RBI, Mahesh Kumar Jain, then spoke about risk management techniques for stable and sustainable growth. He acknowledged the disruptive paradigm shift in financial services brought on by the continuing Fintech revolution in the industry.

India’s RBI Directs Lenders Towards Digital Rupee

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CBDC: In a bid to increase transactions, the Reserve Bank of India (RBI) has extended invitations to a broader set of lenders to engage in pilot programs centered around the central bank digital currency, as reported by three bankers who spoke to local media.

A recent survey conducted by the Bank for International Settlements (BIS) and published on Monday revealed that nearly twenty central banks in emerging and advanced economies are anticipated to have digital currencies in circulation by the end of the decade.

Last year, the RBI commenced trials using Central Bank Digital Currency known as e-rupees in both the wholesale and retail markets.

Currently, prominent state-owned and private lenders such as State Bank of India (SBI.NS), Bank of Baroda (BOB.NS), ICICI Bank (ICBK.NS), HDFC Bank (HDBK.NS), Kotak Mahindra Bank (KTKM.NS), and Yes Bank (YESB.NS) are participating in the pilot project.

RBI Targets: One Million CBDC Transactions

The technology head of a state-owned bank, who attended a meeting with RBI officials on Tuesday, disclosed that the RBI has instructed smaller banks to either collaborate with fintech companies or enhance their systems to initiate CBDC pilots this year.

Due to their lack of authorization to speak to the media, the bankers opted to remain anonymous. RBI Deputy Governor T Rabi Sankar stated on Tuesday that the RBI aims to achieve a target of one million CBDC transactions per day by the end of this year.

As of June 2023, there were 1.3 million customers and 0.3 million merchants utilizing CBDC, according to Sankar. Another banker from a state-owned bank remarked,

“By involving more banks in the pilots, the RBI intends to identify any implementation issues and conduct trials on a substantial user base. We are in the advanced stage of submitting a CBDC pilot request to the RBI. We anticipate receiving approval within the next one to two months.”

In recent weeks, Shaktikanta Das, the governor of the RBI, highlighted that there was no urgency to implement the CBDC on a larger scale. He acknowledged the existence of technological and procedural obstacles and expressed the RBI’s intention to address these challenges before introducing the CBDC in a manner that ensures a smooth and non-disruptive transition.