The cryptocurrency market in India is witnessing a significant improvement amid rising optimism towards cryptocurrencies and India, after a prolonged period of uncertainty. The digital currency sector in India, which has been considered risky and undesirable, is starting to see a slow but steady positive shift in the Indian government's approach to cryptocurrencies.
Analysts believe that this shift in the Indian government's stance towards cryptocurrencies is partly driven by Donald Trump's return to the White House and his pro-cryptocurrency position, which is influencing the thinking of policymakers in New Delhi.
Discussions about cryptocurrencies between Indian sector leaders and policymakers are accelerating, with meetings now being held every few weeks, compared to only a few times annually previously. One of the main demands of the digital currency sector in India is tax relief, as the government imposes a 30% capital gains tax and a 1% transaction tax on cryptocurrency trades. These harsh taxes in India are driving traders to migrate to platforms outside of India, according to cryptocurrency exchanges like CoinSwitch.
Ashish Singhal from CoinSwitch believes that reducing the tax to 0.1% could help track Indian digital currency transactions without driving users abroad. This opinion is supported by a study from the Esya Center, which indicates that over 90% of Indian cryptocurrency trades have been shifted to platforms outside of India due to the current tax system.
Major global companies in the digital currency space, like Binance and Coinbase, are returning to India after a previous exit. Coinbase recently received important regulatory approval in India, benefiting from the pro-cryptocurrency approach supported by Trump worldwide. According to Tom Gaff Gordon from Coinbase, India recognizes that banning cryptocurrencies is no longer realistic, and clearly regulating the market could expand the tax base for cryptocurrencies in India.
The Reserve Bank of India, the biggest critic of cryptocurrencies in India, is softening its tone, despite ongoing uncertainties. The sector is awaiting the release of an updated cryptocurrency policy document from the Indian government. Although comprehensive regulation of the cryptocurrency market in India may take years, current changes indicate a clear shift in India's stance.
There remains a prevailing belief among some that cryptocurrencies are illegal in India, but a generation of young investors is driving the shift in favor of digital currencies. With increasing global support, India may not want to delay keeping pace with developments in the global cryptocurrency market.
