As cryptocurrency grows in popularity and adoption increases worldwide, regulation has become increasingly important. Recently, the Indian Supreme Court pressed for stronger crypto regulation in the country and sought other solutions for the sector. The court voiced apprehensions regarding existing regulatory ambiguities and urged the Union Government to take better steps in formulating comprehensive cryptocurrency.
The justices have openly scrutinized the government’s stance on the emerging sector in the past years. As crypto-assets occupy more space in India’s finances, a national-level agency may also be needed to investigate crypto-related criminal cases. This was in response to doubts and reservations regarding lower-level enforcement agencies handling the intricacies of digital currency cases.
Effective regulation has become increasingly necessary to protect investors and ensure financial stability. The Supreme Court’s calls for a national-level investigative agency are also essential to India’s cryptocurrency growth as the government continues to push for a Central Bank Digital Currency. This move embraces digital innovation while maintaining control over the monetary system.
The crypto trading landscape in India
India is expected to reach over 156 million crypto users in 2023 — five times more than the US. Factors such as the rise of fintech, the adoption of mobile technology, and the increasing popularity of digital payments have boosted the growth of crypto in India.
India is home to the world’s second-largest smartphone market, hosting over a billion smartphone users. The widespread use of smartphones in the country has made crypto trading more accessible to new and old investors looking to diversify their investment portfolios by buying and selling cryptocurrencies from the comfort and convenience of their smartphones.
Investors must consider various factors in crypto trading, including volatility, liquidity, market capitalization, and technological features. To do this, they must keep up with crypto market news when identifying and maintaining their crypto trading opportunities. In the past years, this has become easier for Indian crypto traders as market news and updates are easily accessible on their smartphones.
However, the proliferation of crypto buy-and-sell platforms in the country also points to a rising concern of malicious parties taking advantage. In 2021, British cybersecurity company Sophos identified over 160 fake apps on Android and iOS that attackers used to steal money. These counterfeit apps were designed to mimic globally known cryptocurrency platforms and brokers. By making people believe they have installed financial trading, banking, or cryptocurrency apps from a trusted organization, the attackers were able to siphon off the victims’ savings to overseas bank accounts.
Cryptocurrency taxation in India
While cryptocurrency is becoming widely accepted and used, its decentralized nature makes it near impossible for authorities to track down the source of such malicious fake apps or where the stolen funds went. This is why more effective regulatory measures and guidelines are needed as crypto becomes more accessible.
One such way of regulating cryptocurrency is by implementing clear crypto tax guidelines. In 2022’s Union Budget, it was announced that any income from any virtual digital asset transfer would be taxed at 30%.
This means that people would need to file taxes for gains made on their cryptocurrency investments, including transactions such as selling crypto for rupees or other fiat currency, trading crypto for crypto, and spending crypto on goods and services. The new crypto tax applies to private and commercial investors transferring virtual digital assets during the year. The tax rate is also the same for short-term and long-term gains and applies to all types of income the investor earns.
As per the new provision, non-deduction and payment of necessary taxes to the government can lead to 100% of the amount as penalties and imprisonment for three months to seven years — plus a fine.
While only one aspect of regulating crypto, taxation plays a crucial role in regulating crypto by introducing a familiar and more traditional financial framework to people. This will also encourage crypto users and investors to comply with reporting requirements and promote transparency to reduce potentially illegal activities.
The future of crypto in India
In a previous post, we highlighted the release of AI chatbots as official mobile apps, such as OpenAI’s AI language model ChatGPT. The rise of AI chatbots has led to other companies launching their chatbots and AI tools to keep up with rising demand and interest. These include Google’s chatbot Bard and Microsoft’s GPT-powered Bing search engine. Among many AI enthusiasts, some investors have turned to AI to help navigate cryptocurrency markets.
By harnessing AI, crypto traders can access powerful tools for analyzing and interpreting large amounts of crypto data in real-time. AI can also identify trends and patterns in crypto market movements so traders can make more informed decisions based on up-to-date information. Traders can further leverage AI-based trading systems to eliminate human bias and emotion from their trading strategies, improving their chances of reaching more rational and profitable outcomes.
While certainly not the end-all-be-all of crypto trading, the relationship between AI and cryptocurrency shows potential for even further growth in the future. OpenAI CEO Sam Altman recently announced a new cryptocurrency project called Worldcoin. The project’s core offering is its World ID, an account that only real humans can get — by signing up to do an in-person iris scan using Worldcoin’s “orb,” a silver ball approximately the size of a bowling ball. Once the iris scan verifies the person is an actual human, it creates a World ID.
The project is deemed an increasingly necessary element in the age of generative AI chatbots like ChatGPT, and Altman hopes World IDs can be used to tell the difference between real people and AI bots.
In a world where crypto is used more and more to replace traditional financial transactions and activities, a regulated means of separating between real humans and automated bots can help ensure no malicious people are misusing new technologies to profit unfairly.
