Confusion in the crypto universe: Budget leaves many unanswered questions

What is the News?

The Union Budget 2022 has made several announcements related to the cryptocurrency ecosystem.

What are the announcements made by the Government related to the crypto ecosystem?

Read here: Cryptocurrency tax: Budget 2022 unveils norms for virtual digital assets

These announcements have granted some degree of legitimacy to the cryptocurrency. But it has also left many unanswered questions.

What are those unanswered questions related to the crypto announcements in the Budget?

Firstly, the 30% tax rate on transfer of any virtual/ cryptocurrency asset is in line with short-term capital gains on equity, futures trades in commodities and so on. But the Budget did not clarify if this is only being imposed on short-term capital gains or on all capital gains, including long-term. Nor does it clarify if trading losses can be offset, as is the norm with other assets.

Secondly, the announcement of a tax treatment only implies that crypto assets are being granted legitimacy. But it doesn’t guarantee it.

What are the Unanswered Questions regarding digital rupee?

The budget announced the launch of Central Bank Digital Currency (CBDC). But the announcement does not clarify 1) Whether the digital rupee have any interest-bearing or not, 2) How does the RBI treat the digital rupee in its accounting of money supply, 3) Whether the digital rupee can be seamlessly exchanged for the paper rupee at 1:1 or not, 4) Can it be used in a forex transaction or as an instrument of outwards or inwards remittance? And 5) The way the digital note be extinguished if it is to be withdrawn from circulation.

Source: This post is based on the article “Confusion in the crypto universe: Budget leaves many unanswered questions” published in Business Standard on 5th Feb 2022.