Around mid-2021, messages from unknown numbers used to flood inboxes urging users to invest in cryptocurrencies. The pandemic provided citizens the time to read up more about this new investment avenue and voila, they learnt there was a way they could earn huge returns compared to traditional investment options.
Cut to 2023, and the euphoria among Indian investors seems to have dissipated following a string of events that involved multiple deliberations at the highest echelons of policy making.
Cryptocurrency gained massive popularity worldwide due to the nature of returns it gave to investors and importantly, it managed to lure a section of the population — the youth. But as it happens with any disruptive service or product, cryptocurrency fell into the maze of regulations and policy scepticism.
After witnessing a rise in 2020 and 2021, many crypto exchanges had to bite the bullet after the Indian government decided to bring cryptocurrency transactions under the tax net.
The rapid erosion in investors has left crypto exchanges worried and rightly so. The resistance from policymakers citing reasons from volatility to national security have threatened to cripple a thriving investment avenue, which came as a massive succour in times of rising prices and shrinking wages.
The rude jolt has brought in a sense of ennui among the crypto investing community in India and also forced a major rethink among investors to shift to offshore platforms.
While conservative investors may have shied away from investing in cryptocurrencies, the rapid rise in users in crypto exchanges suggests that it did catch the fancy of investors, especially in the millennial category. But the hard stance taken by the Reserve Bank of India and then the government’s decision to charge a hefty 30 percent tax on digital asset income has proved to be a major bummer for cryptocurrency adoption in the country.
Cryptocurrency exchange platform owners have bemoaned the uncertain regulatory environment despite piquing interest levels. Investors have also shied away in the past few months fearing excessive scrutiny and lack of lucrative returns.
While many exchange platforms have welcomed the move to tax income from cryptocurrency transactions, the hefty tax rate has proved to be a massive deterrent for those looking to invest in cryptocurrency. A stringent tax regime will no doubt stifle the growth of cryptocurrency investing segment in the country and it will be interesting to see how the exchanges navigate further policy curve balls in future.
