The digital asset industry anticipates a much more nuanced approach to outlining a definition of Virtual Digital Assets (VDAs). In addition to this, policy implementation to boost innovation and research and development is also the key to a stronger crypto industry in the country.

“The tokenization of real-world assets is a $10 trillion opportunity and we are already witnessing the rapid advancements in the field of tokenized RWAs. There is an urgent need for investment and innovation in these segments, if nurtured with progressive policies, India has the potential to become a global leader in the digital asset space. We urge the government to amend the VDA definition, explicitly excluding tokenized assets with proven underlying value, similar to established precedents like gift card exemptions,” said Manhar Garegrat, Country Head, of India & Global Partnerships at Liminal Custody Solutions.

With the wider adoption of AI and other advanced technology, Tapan Sangal, Founder, of Mai Labs, believes that 2024 is the year of “transitioning from foundational learning to imperative application of lessons” for the blockchain industry.

“From the budget to be announced soon, our trust in government extends to urging a reconsideration of the taxation system for the virtual digital asset industry, fostering a regulatory environment that optimally harnesses technological innovation. Ethical considerations and robust regulations are paramount to prevent inequality and manipulation in this dynamic landscape,” said Sangal.

Manhar Garegrat also advocated for the removal of the 1% Tax Deducted at Source (TDS), which has affected policies that disincentivize domestic participation in the digital asset market. 

“This incentive will attract investment, generate high-skilled jobs, and solidify India’s position as a global leader in secure digital asset custody. Just like stocks, users should be allowed to offset losses related to digital assets which will encourage more startups to enter this space,” noted Garegrat.

For the industry to flourish in the country, it is important for the government to not only focus on tax regularisation but also on Web3 startups and create special economic zones.

“The web3 industry eagerly looks forward to the Union Budget in anticipation of providing a new opportunity to support a thriving and responsible Web3 ecosystem in India. Web3 and blockchain, going ahead can solve many of India’s challenges in sectors such as payments, education, healthcare, etc,” said Nischal Shetty, CoFounder, Shardeum.

The introduction of specific domestic regulations for India for greater stability, and dedicated funds for indigenous blockchain products would help in the development of the Web3 ecosystem, according to Shetty.

Emphasising the need for tax incentives and sandboxes, Shivam Thakral, CEO of BuyUcoin said, “We need tax incentives and sandboxes to nurture these seeds into thriving startups. Sandbox initiatives need protection to foster experimentation. This will create a new generation of jobs, propel India into the global DeFi and blockchain space, and unlock economic growth. By embracing crypto with vision and collaboration, India can lead the world towards a digitally inclusive financial future, leaving competitors in the shade.”

With the presentation of an interim budget and full-fledged budget post-election, the cryptocurrency sector awaits the introduction of a tax framework and a nuanced legal regulation to unlock its true potential.

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Published: 26 Jan 2024, 10:03 PM IST