The Cryptic Crypto-World
Outlook Money|January 2021
Digital currency is the new asset category. But risks are high due to volatility, lack of
Jyotika Sood
The Cryptic Crypto-World

As many exciting events do, this one started with boredom – pandemic, accompanying lockdowns, and stay at-home culture. A few school friends fooled around on their WhatsApp group. One of them boasted of making considerable profits in crypto currency trade. A few others decided to explore this new asset class. They made money too. Later, much to their consternation, they realised how this seemingly-simple world of virtual currencies was actually bizarre and cryptic.

They already know that the trade was legal in India. One can exchange a cryptocurrency for more of the same, or with similar ones – as with regular currencies like a rupee for a rupee, or a rupee for a dollar – and also across assets, like rupee for gold or stocks. This implies that a bitcoin, which is a crypto asset, can buy rupees, dollars, and gold. For the uninitiated, a cryptocurrency is a digital means of value-exchange that has no form. It is not monitored by a central bank or any global regulator.

Despite its freedom and flexibility, this digital realm without rules, creates problems. In the absence of any legal recourse, investors are often at risk. Except while investing through special exchanges that allow crypto trades. More importantly, Indian authorities have not finalised how to tax these profits. So, while banks convert cryptos into regular currencies, traders are unsure of how to pay taxes on their returns.

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