Crypto taxes in Budget 2022: Better late than never – The Financial Express

By Darshan Sankhala

The budget session of 2022 was revolutionary on many dimensions, with long-lasting effects on the future of the economy. The infrastructure push will be regarded as a historical one, but there is an equally important event that will become a milestone in socio-economic decision making.

Deeming cryptocurrencies as digital assets and a 30% transaction tax on withdrawal are much-needed steps from an economics point of view though they havent wooed many people, especially the youth. Let us understand why the Indian Government and the global community at large are approaching cryptocurrencies in a calculated manner.

Firstly, crypto means hidden, and the entire USP for cryptocurrencies is decentralization i.e. no government involvement. Crypto evangelists argue that the government money isnt stable due to currency trading touching the $7 trillion mark, thereby taking away the stability it used to promise. However, this doesnt mean that the greenback can be replaced by Bitcoin or any other cryptocurrency. Remember, the currency is nothing but a logistical agreement governing the transfer of value against a stable entity. Gold has been the standard for printing money since times immemorial, and cryptocurrencies dont serve the purpose of money.

Bitcoin is far more volatile than the Dollar, and thus, it can be a disaster for people who offer products or services in exchange for money. Imagine selling a house for 1 Bitcoin that could buy you three sedans at the time of selling, and the next day, it can only buy you a cup of coffee.

Money can only guarantee supply or stability, so the cryptocurrencies like Bitcoin will fail in terms of supply, making their prices volatile. This will make crypto unsuitable to serve as money, and thus, the governments move to define it as a digital asset is technically and logically true.

Marketed as the future currency, crypto aims at removing the traceability and accountability out of economics, thereby giving free heaven to do almost anything. This makes cryptocurrencies sound revolutionary in terms of decentralization, but it doesnt transfer the power from the government to users. Instead, it aims to completely blackout the democratically elected governments to track financial activities.

This loophole can not only sabotage taxation regimes but shield all the illegal activities, including terrorism, human trafficking, cybercrimes, money laundering, narco-terrorism, and extortion. This will become a prime tool for criminals and terrorists to mobilize their infrastructure without any fear of law enforcement agencies tracking them.

Crypto sounds promising only to people who dont understand what money actually means and its role in economics. If crypto actually replaced the Dollar, it would result in the collapse of not only the US economy but the entire world economy since it is the global reserve currency. At the same time, there are cases like Africrypt where two brothers got away with $3.6 billion worth of Bitcoin from their platform users. Thus, the lack of accountability can backfire, thereby diluting the very basics of currencies- trust.

The 30% tax rate on transactions may not sound great to unsuspecting youth, but it is a smarter move when compared to completely banning it like many other countries. Countries like El Salvador or MNCs accepting cryptocurrencies should not be taken as a trust indicator or approval of its feasibility since putting governments outside of the equation and dismantling the basics of economics at the cost of unlawful activities cannot be condoned by any sane person. This is indeed a wise decision, and I find that though it came a bit late, it should be welcomed by every citizen with open hands.

(The author is an entrepreneur, filmmaker and founder of RolBol.Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)

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Crypto taxes in Budget 2022: Better late than never - The Financial Express