No one will deny India is an important region for Bitcoin and cryptocurrency. Although there is no official regulation, things are moving along nicely in this regard. One possible roadblock is how local tax authorities aren’t taking kindly to Bitcoin. They state how cryptocurrency is a potential conduit for illicit flows and black money. Consider how India cracked down on black money last year, it remains to be seen how Bitcoin can be handled.
It is evident regulating Bitcoin will be quite a challenge in India. Given the nature of decentralized cryptocurrencies, there isn’t much to regulate in the first place. The only thing officials can do is impose restrictions on service providers, such as exchanges and wallets. However, there is always the question of whether or not Bitcoin needs to be taxed. The answer to that problem is not necessarily black-and-white either.
India Considers Taxing Bitcoin?
More specifically, the Special Investigation Team on black money is quite concerned. According to them, cryptocurrencies can be conduits for illicit money flows. It is not the first time we hear such comments from a government institution. However, there is always a lack of evidence to back up such claims in the first place. In a way, it’s good to see some concern over Bitcoin in this regard. However, it also shows how little officials understand about cryptocurrency to begin with. Especially Bitcoin is far more transparent compared to any other payment method these days.
There is also the question of Bitcoin-related investments made over the past few months. Income-tax authorities show a great interest in such investments. Keep in mind India abolished Rs 500 and Rs 1,000 notes last year. It is possible some of this “black money” ended up in cryptocurrency in one way or another. Then again, people could easily buy gold or other stores of value with it as well. This potential problem is not native to cryptocurrencies whatsoever. For now, there is no public evidence of any illicit investments made with this money.
All of this shows the Indian government isn’t on the same page when it comes to Bitcoin. Creating guidelines is not an easy feat by any means. Some officials in India want to create a competitive ecosystem to begin with. Others want to introduce some harsh regulation, by the look of things. One has to keep in mind Japan officially recognizes Bitcoin as a legitimate currency. India would be wise to keep that option in mind as well.
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