The Indian cryptocurrency industry, ahead of the Union budget 2024, is expecting the government to reconsider the current taxation structure on the virtual digital asset (VDA) class, establish a self-regulatory body for the crypto and block chain sectors, and create sandboxes to help start-ups in the sector thrive.

The crypto exchanges in India have been losing trading volumes on the platform since the introduction of taxation as crypto users moved to offshore exchanges. However, the finance ministry’s recent move to send show cause notices to offshore exchanges and block URLs subsequently has bought respite for domestic exchanges.

Ashish Singhal, co-founder and Group CEO of PeepalCo, notes that crypto platform CoinSwitch urges the government to reduce the Tax Deducted at Source (TDS) on VDAs from 1 to 0.01 per cent, allow offsetting and carrying forward losses from the sale of VDAs, and treat income from VDAs on par with other capital assets. “Reducing the tax arbitrage that exists today will also help stem the flight of capital, consumers, investments, and talent, as well as dent the gray economy for VDAs,” he said.

Further, industry body Bharat Web3 Association (BWA) urges the government to also reexamine the flat rate of 30 per cent applicable to income from the transfer of VDAs, specifically including foreign exchanges in the scope of TDS under Section 194S.

The industry also seeks a standardised regulatory framework. Sumit Gupta, CEO of CoinDCX, said, “Contemplating the establishment of a robust self-regulatory body for crypto and blockchain sector participants could be a game-changer. Implementing a standardised regulatory framework for the crypto and blockchain sectors, the government would not only provide clarity but also unlock a multitude of opportunities and use cases at a global scale, empowering India Inc. to lead on the world stage.”

In a bid to foster start-ups in the sector, Shivam Thakral, CEO of BuyUcoin, notes, “Imagine India as a fertile field; crypto and blockchain are the seeds waiting to sprout. We need tax incentives and sandboxes to nurture these seeds into thriving start-ups. Sandbox initiatives need protection to foster experimentation.” This will create a new generation of jobs, propel India into the global DeFi and blockchain space, and unlock economic growth, he opines.

Further, Nischal Shetty, co-founder of Shardeum, also notes that the industry would also like the ministry to dedicate funds for indigenous blockchain projects, exemplifying real-world utility and innovation.