Welcoming the finance minister’s budget announcement of the introduction of Digital Rupee, Nischal Shetty, founder and CEO, WazirX, a bitcoin exchange platform that allows users to buy or sell the cryptocurrencies available in the market, has called it a huge opportunity for India to explore, go deeper, and fast. India has recognised digital currency at the right time, he said, adding that the country is going the route of launching the central bank digital currency (CBDC) and it should do it fast.

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Presenting the Union Budget 2022-23 this month, finance minister Nirmala Sitharaman said digital currency, to be launched by the RBI this year, will lead to a more efficient and cheaper currency management system. She proposed to introduce Digital Rupee using blockchain and other technologies.

Shetty, a software developer-turned-entrepreneur, said that with the announcement of India’s own CBDC or Digital Rupee by the finance minister in the budget specially mentioning the term ‘blockchain’, adoption and education of the technology will skyrocket the day RBI releases it due to the fact that it is government-powered education of crypto.

“India recognised digital currency at the right time. This is huge opportunity for India that we must explore, go deeper, and fast. There will a time period for currencies to become global digital currencies and dollars are ahead right now they have allowed private players to form their stable coins backed by the dollar but India is going the route of launching the CBDC and it should do it fast.”

Nischal was in a webinar with Kailashnath Adhikari, MD, Governance Now, as part of the Visionary Talk series organised by the public policy and governance analysis platform.

He said Indians today form a majority for any website in the world and gave the example of Facebook that has hundreds of millions of Indians, set base in India and converted to rupee.

Like Facebook, he said many other websites are earning huge money from Indians but accepting only dollars. With CBDC, they can take INR directly from Indians and integrate and INR slowly becomes a global currency and it strengthens our economy.

Asked if the definition of cryptocurrency addresses all forms of cryptocurrency, he said it is a broad definition. With the government saying it will bring in exceptions as things progress, the government’s objective was not to leave out anything and gradually narrow down.
 
Asked if taxing digital assets will rein in a formal cryptocurrency system, he said by bringing in taxation for digital products the budget has set out a ripple effect. For people who are not dealing in crypto they now have clarity, for others, their confidence is boosted. For those who are early movers in crypto, their confidence is increased and they feel they can declare their money without fear.

The dampener, he said, is that despite taxation people are still waiting for regulation because it is a financial market. He however added that it is a very complicated process to bring in regulation for cryptos and may take time as depending on its use it can be an asset, utility or currency.    

Asked how TDS will be applied on cryptocurrency, he said the industry still has to work out the nuances, whether the platforms are responsible or if buyers are responsible, otherwise those who are trading will have privacy risks as they have to share details to the other party.

“Especially for crypro, day traders and high-frequency traders who rotate their money several times in the day, if they have to pay 1% TDS of every sale and if they will lock all their capital in TDS is bad news. Similarly, processing refunds are going to be a tedious and nightmarish process for the government too. At least for active day traders 1% TDS needs to be relooked at,” he said.   

With large private sector banks not allowing their account holders to buy crypto currency from their accounts, Shetty said that with after-tax clarity now many banks have started to allow this but it will take some time and others will follow. “The cryptocurrency has a lot of opportunities for banks to earn revenue and income. The early banks are going to become large players in the industry and then the industry will not have interest in switching banks later if payment gateways are working fine.”

On the announcement of 30% taxation on cryptocurrency income and market expectations, he said a large proportion of people in India earn income in less than 30% bracket and even with crypto for the government to expand the ambit of people paying income tax may be a good idea. But, he said, the concept of income tax is that people under lower income bracket levels should be exempted from it as they have to bear several expenses in their daily lives.

Shetty also said that RBI should consult sector professionals for introducing its digital currency, as today no one else, besides the entrepreneurs, in India know on-ground realities of crypto better and can provide better insights.

“It will be a smart move to involve the crypto industry in the consultation process as we have already faced them. I would truly want CBDC to succeed in India and for the first time rupee has a chance of being a global currency,” he said.   

Asked if there is now a need for advertising muscle to educate the common man on cryptocurrencies, Shetty said responsible advertisements with the right approach and bigger threshold by an unregulated industry will be the correct way as compared to the traditional financial markets.