As per recent updates, the central government is considering imposing an 18% goods and services tax (GST) on all bitcoin transactions. At the said 40,000 crore ($5.5 billion) annual value of bitcoin, the 18% GST is expected to generate INR 7,200 crore ($1 billion) in tax revenue.
The recent update is a sign of the government showing greater appetite towards cryptocurrency transactions. According the the TOI the Central Board of Indirect Taxes and Customs (CBIC) has received a proposal from the Central Economic Intelligence Bureau (CEIB) that categorizes Bitcoin as an intangible asset and imposes an 18% goods and services tax (GST) on transactions.
What is Bitcoin?
The origins of Bitcoin go back to 2008 when two programmers with the pseudonyms Satoshi Nakamoto and Martti Malmi registered a new domain, bitcoin.org. Their white paper ”Bitcoin: A Peer-to-Peer Electronic Cash System” established the basic principles of Bitcoin as described by Coindesk an electronic payment system that would eliminate the need for any central authority while ensuring secure, verifiable transactions. Bitcoin launched in early 2009, becoming the first cryptocurrency to log transactions on a decentralized, secure blockchain network. It is currently the largest cryptocurrency measured by market capitalization and the amount of data stored on its blockchain network.
Bitcoin and cryptocurrency truly on the rise?
The Indian government’s stance on crypto trading appears largely unclear. In March 2020, Bitcoin was declared completely legal in India. The Supreme Court took the landmark decision on March 4, 2020, by lifting restrictions on trading bitcoins in India. However, the Bitcoin and cryptocurrency regulation is still restrictive.
Bitcoin and cryptocurrency are certainly in their infancy in India and globally. The leading Bitcoin and cryptocurrency has recently witnessed a tremendous uptick in a post-COVID-19 world. Bitcoin prices began gathering pace towards the end of October, more than doubling in value over 3 months as the market capitalization now soars over $582 billion at the time of writing.
A key reason for this staggering resurgence is the growing institutionalization of the digital currency, paving the way for it to scale and mature as a crucial asset class. Other prominent currencies such as Ethereum have witnessed a similar surge too. Today, top financial institutions the likes of ICICI Bank, HDFC Bank and Yes Bank to name a few have allowed account holders to fund cryptocurrency trades. They are also offering many other features to Bitcoin and cryptocurrency exchanges, as reported in the Economic Times.
Here are some examples of global movements that showcase the resurgence of Bitcoin and cryptocurrency:
- In October 2020, Paypal started to permit customers to buy and sell Bitcoin and other cryptocurrencies from their accounts
- A number of tech companies, including payments player Square Inc. have begun holding cash reserves in Bitcoin
- In August 2020, Fidelity Investments, the asset management firm with $3.3 trillion in assets, announced the launch of its first Bitcoin mutual fund
- Central banks are taking a serious interest in digital cash. Central banks including the Federal Reserve and the European Central Bank, are assessing how to digitalize their own sovereign currencies, a validation of the blockchain code underpinning Bitcoin.
The greater good
It is worth stepping back and looking at the bigger picture and the greater good cryptocurrencies have the potential to serve. Bitcoin and Cryptocurrency have all the right attributes to bring financial services to all, irrespective of income or location.
The underlying blockchain technology that powers cryptocurrency can help the unbanked and underbanked by allowing people to create financial alternatives efficiently and transparently. Various factors such as security concerns, and widespread acceptance from customers and the market will influence the rise or fall of cryptocurrency in India.
The Wire very sensibly suggests that legislation rather than bans is a more effective means of ensuring stricter verification protocols and risk reduction. Major concerns have existed regarding the risks around money laundering and/or terrorism financing with cryptocurrency in India.
These negative perceptions around Bitcoin and cryptocurrencies can be shed with cyber intelligence agencies, tech-savvy agents and the youngest, brightest minds to decipher these transactions. If the Indian government can implement robust regulation and security protocols, it has the potential to become a hub for blockchain and cryptocurrency innovation in the near future.