Virtual digital assets Financial News

Emerging crypto asset classes like utility tokens, security tokens, crypto derivatives such as futures and options would be caught in the tax net with the budget broadening the definition of virtual digital assets (VDAs).

Bitcoin and crypto has undergone a significant change. This shift, often described through the lens of the Overton Window, marks the movement of crypto from the fringes of financial systems to a central position in economic discourse. The Overton Window, named after American political scientist Joseph P. Overton, describes the range of policies politically acceptable to the mainstream population.

VDA regulations in India VDA encompasses various kinds of digital assets. In India, VDA was formally recognised in March 2023, after the Ministry of Finance brought VDA under the Prevention of Money Laundering Act (PMLA). It mandates that all the VDA service providers operating in India should register with the Financial Intelligence Unit-India (FIU-IND) to combat money laundering and terrorist financing.

Virtual Digital Assets (VDAs), driven by the burgeoning acceptance of blockchain technology and its transformative potential. According to Chainalysis' 2023 crypto adoption index, India stands at the forefront of grassroots crypto adoption worldwide. While investors have various options for exploring VDA investments, centralized exchanges remain the most popular choice. The prevalence of centralized exchanges stems from their user-friendliness and simplified trading processes. However, investors must recognize the importance of selecting a compliant exchange to ensure a secure and protected investment environment. Understanding Compliant Exchanges and Key Considerations What constitutes a compliant exchange? What are the crucial factors to consider when selecting a VDA exchange?

Big financial institutions such as Fidelity Investments’ foray into the cryptocurrency market is a boon rather than a bane for the asset class and will aid in building the ecosystem further, according to Vikram Subburaj, CEO, Giottus Crypto Platform. “As more traditional financial institutions enter the crypto market, it validates the industry’s legitimacy and attracts a more extensive user base,” Subburaj said, adding, “Rather than perceiving this as a threat, we view it as a positive development that validates the potential of the crypto market. In an interview with ETMarkets, Subburaj also spoke about the confluence of opportunities and challenges in the crypto market, and Giottus’ business growth plans. Edited excerpts: What challenges and opportunities do you see in the cryptocurrency market, both globally and in the context of India’s regulatory developments, in the coming years? In the crypto market, both globally and in India, we anticipate a confluence of challenges and opportunities.

virtual digital assets (VDAs). One of the most popular uses of VDAs is for investments and trading which was boosted by the rapid appreciation in their value experienced in 2021. Various surveys indicate that VDAs have been more intensively adopted in emerging market economies than in advanced economies.

cryptocurrency traders who have moved their virtual digital assets (VDAs) to wallets of offshore exchanges like Binance face a dilemma as they fill their Income tax return (ITR) forms in which for the first time VDAs find a mention. They are unsure whether to disclose their ‘overseas’ crypto holdings. Does transferring the coins from a wallet in an Indian exchange to a digital purse offered by an overseas exchange makes the VDAs a ‘foreign asset’ in the eyes of the Income tax (I-T) authorities? If it does, then hiding the information would be a gross violation. However, if they disclose the VDAs (transferred through the blockchain network) as ‘foreign assets’, it may be later construed as a breach of the Foreign Exchange management Act (FEMA). Simply because moving cryptos originally purchased in India to a wallet abroad can be interpreted as cross-border flow of currency in the garb of VDAs. And, reporting of any foreign asset without any matching remittance of currency through the banking channels could be questioned later. No clear answers

Exchange and transfer of virtual digital assets would also fall under PMLA laws. (Representational)

TDS deductions for virtual digital assets, under which date of transfer and mode of payment will have to be specified. From July 1, tax deducted at source (TDS) of 1 per cent will be levied on payments towards virtual digital assets or cryptocurrencies beyond Rs 10,000 in a year, as the Finance Act 2022 has introduced Section 194S in the I-T Act. In the run up to implementation of the new provision, the Central Board of Direct Taxes (CBDT) on June 21 notified certain amendments in I-T Rules with respect to furnishing TDS returns in Form 26QE and Form 16E.

Mumbai: Celebrities should be “circumspect” while featuring in cryptocurrency-related advertising, since crypto is an unregulated product in India, the Advertising Standards Council of India (ASCI) said. ASCI is a self-regulatory body, and its guidelines are not legally binding. In case of a breach, the standards body has in the past published the names of those who have not adhered to the guidelines. It also escalates such cases to the relevant government regulator. “We have always maintained that celebrities need to do their due diligence on the claims they endorse. The Consumer Protection Act, too, lays down penalties for endorsers in case the ad they feature in is found misleading, and if they have done no due diligence,” said Manisha Kapoor, CEO of ASCI.

virtual digital assets (VDAs), which will be at par with the GST applicable on casinos, betting and lottery. According to the media reports, services such as crypto mining, with sales and purchases, are likely to attract the 28 per cent GST if the proposal is presented and approved in the next GST council meeting. The meeting's date is not finalized yet. However, the buzz wreaked havoc on the crypto community, which is already feeling the heat of 30 per cent taxations and 1 per cent TDS applicable from July 1.

Mumbai: Questioning the `shadow ban’ on cryptocurrencies, leading banks have asked the umbrella institution National Payments Corporation of India (NPCI) to spell out in a formal directive the curbs on the use of the popular money transfer tool ‘Unified Payment Interface’ to buy and sell the virtual digital assets (VDAs). Several banks have grudgingly blocked UPI for trading of cryptos following “verbal instructions” from NPCI which operates retail payments and settlement systems in the country. The banks, some of which are shareholders of NPCI, raised the issue at a recent meeting after the payments body expressed its reservations a few weeks ago on the fund flows through UPI for crypto trades, two persons aware of the discussions in the meeting told ET.

There has been a spike in dealings related to virtual digital assets (VDAs) in recent times. Further, a market is emerging where payment for the transfer of a VDA can be made through another such asset. Hence, tax authorities have introduced a new scheme for the taxability of such transfers:

tax and GST on virtual digital assets, an official said. The set of Frequently Asked Questions (FAQ), which is being drafted by the Department of Economic Affairs (DEA), RBI and Revenue Department, would also be vetted by the law ministry, the official added. «FAQ on taxation of cryptocurrency and virtual digital assets is in works. Although FAQs are for information purposes and do not have legal sanctity, law ministry's opinion is being sought to ensure that there is no loophole,» the official told PTI.

Mumbai: Retail investors and crypto trading exchanges are bracing for sluggish growth as the new tax regime governing virtual digital assets (VDAs) comes into effect from Friday, April 1. Retail investors also squared off their positions to set off any losses they may have incurred during the previous financial year, industry executives told ET. The Finance Bill 2022, which comes into effect on April 1, also requires traders to pay a flat 30% tax on gains made on VDAs. Further, unlike in other asset classes, retail investors will not be able to set off losses incurred against crypto coins, claim expenses or acquisition costs, or benefit from a reduced slab for long-term capital gains under the new tax regime. Once the new norms are fully in force, it will likely “impact volumes by at least 20-50%,” said a crypto industry player on the condition of anonymity.

The government on Thursday proposed to tighten the norms for taxation of cryptocurrencies by disallowing set off of any losses with gains from other virtual digital assets.

Institute of Chartered Accountants of India (ICAI) on Tuesday said it is working on a research paper on guiding its members on accounting and auditing standards for cryptocurrency assets. The report will cover taxation implications, valuation and auditing of crypto and other virtual digital assets (VDAs), the premier professional accounting institute said. It will submit the report to the Centre by April end. «This (crypto) is a complex topic and we are seized of the matter,» ICAI president Debashis Mitra said.