Budget 2022 must bring more clarity to the cryptocurrency sector

moneycontrol.com:

The financial services sector in India has been characterised by exponential growth, coupled with significant innovation and disruption over the past few years. The burgeoning adoption of cryptocurrencies and the larger blockchain ecosystem in India is one such example.

With a rapidly-growing investor base, and multiple crypto unicorns, there is a bullish sentiment around this sector. This is highlighted by estimates that peg the possible contribution of digital assets to be at $1.1 trillion by 2032. It is also being looked at as a major source of FDI, as well as a driving force for the creation of thousands of direct and ancillary jobs in India.

Despite these factors, there is regulatory ambiguity regarding the way forward for this sector. The upcoming Union Budget is expected to bring some clarity in this regard.

Initial highlights of the proposed cryptocurrency Bill point towards the role of SEBI in regulating cryptocurrency as an investment asset in capital markets, with the RBI at the helm of the broader monetary and foreign exchange aspects. Jurisdictional clarity in this respect is important, considering that a Reuters report pegs the number of cryptocurrency investors in India to be at 15-20 million, with a holding size of nearly Rs 400 billion.

Crypto Assets and Taxation

Recognising cryptocurrency as a legitimate tradable asset under SEBI’s oversight would bring in greater stability, not just in terms of institutional regulation, but also through better understanding of digital assets. Treating it as an investment instrument will also allow investors greater diversity in their asset portfolios, benefitting retail investors in the medium-term.

Additionally, encouraging public-ledger-based crypto-assets (vis-a-vis