- India’s 30% tax on cryptocurrency profits is s clear sign of its attitude toward the sector
- The country has decided not to ban the cryptocurrency sector outright, but wants to put people off
- Will other countries follow India’s lead?
The news yesterday that India will not ban cryptocurrency trading but will instead allow it but at the cost of a 30% tax on profits is, in many ways, the perfect response from lawmakers. The move allows them to monitor cryptocurrency activity but the hefty tax connotations will put many off from setting foot in the space, giving the Indian government possibly the best solution to the cryptocurrency conundrum. The question is, will other governments follow suit?
Banning Crypto is Unfeasible
Governments by and large have reacted negatively to the advent of digital assets and their myriad derivatives, but they know that banning cryptocurrency outright will only drive the movement back underground. The genie is most definitely out of the bottle.
They also know that effective regulation has the chance to bring billions of dollars of unanticipated tax into their pockets, so finding a middle ground is clearly beneficial.
Progressive Governments Looking to Get the Balance Right
The Indian government’s decision to tax crypto trading gains at 30% while not allowing losses to be discounted from them is a clear sign that it is trying to dissuade its citizens from using and trading with cryptocurrencies without having to go through the issues associated with banning it – if you make something unattractive enough, people will simply not want to do it.
Such a system has already been mooted in other countries, including the U.S., and indeed, how far to go with taxation of cryptocurrencies is largely dependent on the attitude of the country in question. On the one hand are the countries like China that want to stamp out cryptocurrencies in all their forms, while at the other end of the spectrum are more progressive countries in the West that see the blockchain space as a movement with huge potential and that they want to be at the forefront of.
High taxation in these more progressive countries would be anathema to development and building, so we are unlikely to see it in the likes of the US and the UK, but we could well see India’s stance on cryptocurrencies replicated in the less pro-crypto countries sooner rather than later.