Kamath said crypto at best will be treated as an asset and not a currency by the government, subduing the enthusiasm of crypto investors who lauded the Finance Minister’s announcement as a green flag for legalising crypto.
Zerodha founder Nithin Kamath has cautioned against the prospects of crypto assets, sharing how Finance Minister Nirmala Sitharaman’s Budget 2022 proposals may erode the value of such digital assets. Kamath said crypto at best will be treated as an asset and not a currency by the government, subduing the enthusiasm of crypto investors who lauded the Finance Minister’s announcement as a green flag for legalising crypto.
Kamath also said that it is good news that crypto was finally acknowledged in the budget. But since crypto will not be treated as a currency it will lose its primary use case, he said, adding that crypto will potentially be treated as a stock, overseen by a regulated entity. In any case, Zerodha will start offering crypto once SEBI approves it, Kamath said.
Crypto, which runs on blockchain technology, is lauded as an unconventional mode of transactions as it doesn’t come under purview of any central authority or government. India has not recognised crypto as a currency and has tilted in favour of issuing a central bank issued digital currency. Sitharaman announced that RBI will launch a digital rupee in the upcoming fiscal year in the Budget presentation.
Also read: Union Budget 2022: Digital rupee based on blockchain tech to be introduced in FY23 by RBI, says FM Sitharaman
Finance Minister Sitharaman however recognised the “magnitude and frequency” of virtual digital assets such as crypto, NFTs on the budget floor saying that there has been a phenomenal increase in transactions in virtual digital assets. This makes it imperative for the government to provide a specific tax regime, she said, adding that income from transfer of any virtual digital asset will be taxed.
Since crypto will come under tax regime, Zerodha founder said the government will try to ring fence crypto related transactions to restrict capital outflows. “Whenever the crypto bill comes through, my guess is that they will want to ring-fence Indian crypto to restrict capital flows outside India,” he said. “So, crypto will potentially be treated like stocks. They will probably have to be held in some demat equivalent overseen by a regulated entity. If this happens, crypto will be centralized and lose its next big “advantage,” he added in a tweet Tuesday.
Apart from a tax of 30% on transfer of virtual digital assets, and a TDS of 1% on such transactions, the Budget document also laid down that losses from transfer of digital assets can not be set off against any other income. Kamath, whose company Zerodha is the largest share broker in India, said the price of crypto needs to go up so that investors do not compound losses. “If crypto prices don’t keep going up like the last 2 years, I don’t see how the current adoption rates will hold up, assuming that some of what I said comes to pass.,” he added.
Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.