What crypto sector is looking forward to in Budget 2022

With the ongoing budget session, all eyes are on a framework for a successful future for crypto. With the unprecedented rise of blockchain and advancements in fintech in the last two years, the sector has several expectations in terms of policies and initiatives.

Aniket Jindal, Co-founder, Biconomy, states, “The Crypto and blockchain sectors are looking forward to the upcoming Budget session with their own expectations for clarity and a framework to ensure a smooth road for the Indian crypto future. India has been an active participant in this space since the recent rise of the blockchain sector and has contributed to it as well. The global technology sector has witnessed manifold advancements in the past couple of years, most of which could be attributed to the pandemic that implored businesses and administrations to embrace new technologies and innovations to endure the socially distant and remote structures.”

With the upcoming Budget season, we expect to see further policies and initiatives that encourage the Indian entrepreneurial sector, especially on the blockchain and web3 front.

Jindal’s expectations for the Budget session include:

Regulatory Framework

Given the extent of the Indian Web3 industry, a regulatory framework that ensures continued innovation and development in the space would be expected from most of the leaders of this industry. Furthermore, regulatory clarity regarding this sector would enable the vast and talented developer ecosystem of India to provide more solutions that optimize existing traditional systems.

Encouraging Web3 Start-ups to nurture the spirit of innovation

The startup space of India has grown rapidly in 2021 and the ecosystem has been quite conducive to further growth by way of support and reforms introduced by the Government of India. We expect a continued effort towards the startup sector at large and the blockchain industry in particular for this session as well.

Tarusha Mittal, COO and Co-founder, OroPocket and UniFarm says, “The financial year 2021-2022 had been quite an eventful year for the blockchain and crypto industry, especially in terms of regulating the industry. I see 2022-2023 would be even more crucial for the industry as we foresee more clarity in terms of regulation as well as taxation from the Government.

We request our Honourable Finance Minister Nirmala Sitaraman to bring more stability to the industry with the upcoming Union Budget. I believe crypto-assets if regulated properly and in a more liberal manner can bring tremendous benefits to the economy with by-products like increased prosperity to the investor community and at the same time protecting them from any potential threats. Also, introducing a progressive taxation policy for crypto will boost the industry's confidence.

We also wish that the Government should encourage startups involved in gold, silver, and other commodities. We hope that the stringency of regulations would be reduced and retrograde tax should not be there so that more people could access it.”

Aishwarya Shivakumar, CEO, Oddz Finance expands, “Crypto and blockchain are no longer a passing trend among investors or the government. Despite regulatory uncertainty, the number of domestic entrepreneurs operating in this space is skyrocketing. Startups in the industry are now hoping for clarity from Finance Minister Nirmala Sitharaman from the upcoming Union Budget on matters like taxation, law, exemptions, and regulations.

Cryptocurrencies and Taxation

Crypto taxation would be the first thing to consider. Recognizing crypto as a valid asset under SEBI's supervision would result in more stability, not just in terms of institutional regulation, but also in terms of a better understanding of digital assets. Treating it as an investment tool would allow investors to diversify their asset portfolios, which will help retail investors in the long run.

A regulatory framework of this type might also assist central bank digital currencies (CBDCs) in coexisting with crypto assets, fostering better confidence and stability in cryptocurrencies.

Additionally, the Budget might provide further clarity on its taxes. There have been proposals to amend the Income Tax Act to bring income from cryptocurrency exchanges within the tax net. This will also clarify the scope of GST's application to trading and brokerage operations.

Accountability and Investor Safety

Investor safety would be another important factor to be considered. The importance of ethical marketing has been underscored by Finance Minister Nirmala Sitharaman, who hinted last month at government regulation of cryptocurrency advertising after studying the standards set by the Advertising Standards Council of India. Investor protection will help considerably to create a healthy crypto ecosystem because of its ability to encourage knowledgeable investments while discouraging casual investors.

Another critical factor to address while integrating cryptocurrencies into the mainstream macroeconomic framework is the responsibility of cryptocurrency intermediaries.

In this connection, the Budget may emphasize the importance of stronger norms for investor verification and reporting systems.

This legislation may also reflect new FATF instructions distributed to nations on the application of these standards to all virtual assets, virtual asset operations, and virtual asset service providers. Customer and trader verification with exchanges and anti-money laundering agencies, as well as the development of coordination channels between them, are also expected to be prioritized in regulation.

The relevance of the 2022 Budget grows in light of the broader economic recovery it seeks to usher in. Given its impending adoption, implementing supportive and forward-thinking cryptocurrency legislation can play a key role in this recovery, states Aishwarya.