Cryptocurrency markets around the world have been witnessing an upheaval. In India, however, the investors have been battling with this, and much more.
In this financial year, newer taxes were introduced on trading in digital currencies. Later, crypto exchanges stopped payments via UPI (unified payments interface). And now there are talks of GST being levied on cryptocurrencies, although a section of media denies such reports.
MintGenie spoke to Vikas Ahuja, CEO of CrossTower India, a crypto exchange platform, to find more on this. He shares his views on the state of affairs in crypto market in India, and the sector's future outlook.
There are some media reports that suggest that GST council is contemplating imposing 28 percent GST on cryptos. Do you think this will be another setback to crypto's growth in India particularly after 30 percent LTCG and one percent TDS?
In order for India to enter the next era of growth and embrace digital assets, regulation and taxation are necessary. It is indeed appropriate and necessary to tax capital gains, and while this can reduce investor gains, they should not be a significant deterrent for trading if the tax is appropriate.
A 30 per cent tax is already being imposed on the sale of crypto assets and NFTs but with an additional 28 per cent GST, the majority of the profits that people will earn over a period of time will be affected when cryptocurrencies are monetised.
Do you think levying these taxes will help the ecosystem to foster growth of technology sector in India?
CrossTower believes that appropriate taxes on gains are beneficial to the ecosystem. This ecosystem is overall beneficial to the growth of the technology sector in India and we believe that the development of the technology industry will add 1.1 trillion dollars to the GDP of India.
It is important that the appropriate regulatory framework, including the taxation of digital assets, be implemented in a manner that ultimately fosters the growth of the industry. This particular tax may not have the effect of facilitating India's growth and may ultimately lead to India being a trailing participant rather than a trail blazing thought leader that it has the promise to be.
Crypto prices have been falling steeply for past few days, leaving investors losing a substantial amount of wealth. How do you see this decline in the context of overall bearish sentiment in the financial markets?
Several factors account for the ongoing crypto market decline, including inflation and recession fears. Also, the global crypto market has responded to higher yields on US Treasury securities and the prospect of aggressive policy tightening to address inflation.
We believe that industry participants may have grouped digital assets into a risk-based bucket. However, over time, CrossTower believes that digital assets will be evaluated on the ecosystems that they create as they are better understood by the financial community.
Should cryptos be compared to equities, or to foreign exchange when we look at the overall trend of the market?
Crypto is difficult to value on a fundamental level the way traditional finance is accustomed to valuing stocks, but one of the biggest themes of the market selloff in traditional finance has been repricing growth stocks significantly lower. This applies particularly to "unprofitable tech" stocks.
These are young companies in traditional finance that have great growth in customer acquisition, but they are running at negative margins. Many of these stocks are down 80 or 85% from their highs. It seems that some traditional players are throwing BTC into the "growth stock" category.