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crypto: Budget 2024: Need for crypto-friendly budget and level playing field, says WazirX’s Rajagopal Menon
As India eagerly awaits the budget announcement on February 1, 2024, the cryptocurrency industry is looking for clarity and support for a conducive regulatory environment.
In an exclusive interview with Rajagopal MenonVice President of WazirXa leading cryptocurrency platform in India, key insights on industry expectations have emerged. Menon highlights the urgent need for a level playing field, addressing tax challenges and fostering collaboration among crypto industry and government.
Given the upcoming budget on February 1, what impact do you think it will have on the overall cryptocurrency sector in India? Are there any specific strategic areas or policy changes that you hope will benefit the growth of the sector?
Rajagopal Menon: All the Indian cryptocurrency industry is asking for is a level playing field. Foreign exchanges are operating in the grey zone of regulatory and tax arbitrage. Indian exchanges are losing market share, investors are losing legal recourse, and the government is losing revenue.
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The second point is the ease of doing business. The Indian crypto industry is having a very difficult time functioning because we don’t have stable banking connections. Indian banks have their own hurdles to partner with crypto platforms.
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As the regulatory landscape for cryptocurrencies continues to evolve, what regulatory measures or frameworks do you expect or hope to see addressed in the upcoming budget, and how do you think they will impact the operating environment for crypto businesses?
Rajagopal Menon: We hope that the FM will reduce the TDS from 1% to 0.01%. This will help in continuing to track and trace transactions, which will also make tax collection easier. If Indian investors continue to trade from KYC-enabled Indian platforms, it would also be effective for retail traders and investors.
The no-set-off or loss-carry-forward rule needs to be changed. There is an urgent need to bring taxation on par with stocks and derivatives by allowing for the set-off or carry-forward of losses. The 30% threshold was set in response to comparisons between digital assets and highly speculative sectors such as gambling and betting. Cryptocurrencies are more akin to securities transactions, requiring clear ownership and title of assets and sufficient liquidity to transact. Current tax brackets will only force a large portion of transactions underground and will discourage and deter risky traders from trading cryptocurrencies.
Cryptocurrencies are often at the forefront of technological innovation. As the budget approaches, what kind of support or incentives would you like to see to foster innovation and development of blockchain and crypto-related technologies in India?
Rajagopal Menon: Since this will be a vote on accounts rather than a full-fledged budget, we are keeping our fingers crossed that taxes will be optimised. Once the new government is in place, we expect a lot of regulatory action. India is a signatory to the G20 Delhi Declaration, which sets out a clear roadmap for cryptocurrencies. The roadmap stipulates that all G20 countries must have cryptocurrency regulations in place by 2025.
Investor confidence plays a crucial role in the success of the cryptocurrency industry. How do you anticipate the impact of budget announcements on investor sentiment towards cryptocurrencies, both domestically and internationally?
Rajagopal Menon: Investor confidence is all about sentiment and signaling. If the government were to optimize taxes on cryptocurrencies, it would send the right signal to the crypto community: there would be a wall of money coming back into the Indian crypto ecosystem that fled the country because of taxes. More venture capitalists would be comfortable investing in Indian crypto startups, and many developers who have moved abroad could return. This creates a virtual cycle of additional investments, leading to more jobs and a thriving ecosystem.
In light of the budget, how do you see the collaboration between the crypto industry and government evolving? Are there specific areas where you think a closer partnership could lead to mutual benefits for the industry and regulators?
The industry is in constant dialogue with the government and various government agencies. We hope that when the government develops its regulations, it will trust the Bharat Web3 trade association. Together, we can achieve the regulatory sweet spot, where there is a delicate balance between the risks and benefits of different regulatory approaches. This requires a coordinated effort between the government and industry to ensure that regulations are consistent and do not lead to unintended consequences.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. They do not represent the views of Economic Times)
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