Cryptocurrency has several characteristics which have benefited the black money market due to its rapid and anonymous nature. This has resulted in major crackdown including the second most populated country in the world, India. India boasts of almost $3.5 billion worth of trade n a short span of 17 months.
Tax notices have been sent to cryptocurrency traders and investors on the basis of manipulation of funds to avoid taxes. Nine exchanges, such as Unocoin and Zebpay have been asked to give data of certain investors to the government. There are reportedly tens of thousands of people who have been issued notices.
Indies stance on cryptocurrency is still not clear, although the RBI advises caution on the investing and trading of it, cryptocurrency such as Bitcoin is not illegal in India. The capital gains tax cannot yet come into picture, as proper laws have not been drafted in regards to cryptocurrency. Therefore the confusion is bound to arise if nothing is done in terms of regulation.
“We cannot turn a blind eye. It would have been disastrous to wait until the final verdict was out on its legality … We found that investors were not reflecting (cryptocurrency gains) and in many cases, the investment was not accounted for,” B.R Balakrishnan, a state tax official told.
Countries like China and South Korea which have a large community of Bitcoin miners, traders and investors have started to become very strict on cryptocurrency activity. China has even halted virtual currency trading on domestic exchanges and banned Initial Coin Offerings. South Korea is one the largest cryptocurrency markets in the world. The continuous announcements of plans on regulating cryptocurrency have affected cryptocurrency prices all over the world.
Overall the government fears that cryptocurrencies such as the popular Bitcoin is posing as a threat to local fiat currencies. Also the government claims to be protecting the investors in the high volatile bitcoin market, as fears of a bubble keep being blown by the media and by some financial moguls.
India needs to look at countries such as Japan in this regard. Japan is the friendliest nation on earth towards Bitcoin terming it as payment that is not legal currency. This has helped boost the country, as digital payments need to be recognized and vouched for. India needs to supports digital currency such as Bitcoin as currency notes are a major problem due to its continuous ways of being hidden by the government.