According to a report by CNBC TV18, India is looking to reach out to stakeholders in the crypto industry to seek inputs to clarify the regulatory framework for digital assets. A panel headed by the secretary of the Department of Economic Affairs (DEA) is expected to release a consultation paper on digital asset regulations in the country in October 2024.

Lack of clear regulations hurts Indian crypto investors

India is considering reaching out to crypto industry experts to streamline regulations surrounding the emerging digital asset industry.

In stark contrast to recent developments in the country lack With so much excitement surrounding the cryptocurrency industry, the Indian government is now considering releasing a consultation paper seeking industry stakeholders’ ideas on how to effectively regulate this emerging asset class.

According to sources close to the matter, a panel within the DEA has been tasked with drafting the consultation document. The consultation document is expected to be available between September and October 2024.

The urgency for clear regulations for cryptocurrencies in India cannot be overstated, as the country’s crypto industry still seems to operate somewhere in a legal grey area. While there are clear laws regarding the tax implications of crypto transactions, the lack of consumer protection against exchange hacks remains a concern.

The recent hack WazirX, a leading Indian cryptocurrency exchange, lost $235 million in customer funds from one of its multi-sig wallets. This is just the latest example of how Indian crypto investors are essentially left on their own when the safety of their digital assets is compromised.

Since the hack, the exchange’s WRX token has seen a significant drop in value, from $0.36 in March to around $0.15 in August 2024.

However, WazirX has stated that it is working on it restore the trade balances between 18 and 21 July 2024. However, a legal apparatus that customers can rely on seems to be lacking.

Happy Times Ahead for Indian Crypto Investors?

India has established itself as one of the largest cryptocurrency markets in the world and consistently ranks among the countries with the highest number of crypto investors and traders.

The current tax treatment of crypto transactions in India entails a flat 30% tax on all crypto-related profits from trading, selling or issuing crypto. At the same time, losses cannot be offset against profits to reduce tax liability.

A TDS (tax withheld at source) of 1% will be levied on the sale of crypto assets exceeding $595 ($119 in certain cases) in a single tax year, discouraging discourage private investors from actively trading in the sector.

The Indian government’s decision to seek industry input on clarifying crypto regulations can be seen as a positive sign for investors and traders.

Lowering tax rates would certainly attract more retail participation in the industry, allowing the government to expand its tax base while reducing the tax burden on profitable investors. It remains to be seen what the consultation document will propose in the coming months.