Are Cryptos Set For A Comeback?

Clampdown on cryptocurrencies failed to deter investors, who moved to decentralised exchanges. Here's what lies ahead...

- Aprajita Sharma

THE FRENZY AROUND cryptocurrencies may not be apparent as it was a couple of years ago, but in certain circles, it’s as palpable as before. Take the owner of a listed FMCG firm who asked his treasury department to take some exposure to cryptocurrencies. “The department has put some funds in cryptocurrencies via our exchange. It could be just 1% of the portfolio but amounts to crores. As they become comfortable with the volatility, they may take it to 5%,” says the founder of the crypto exchange.

The crypto wave in India waned in FY23 after government imposed a flat 30% tax on income from transfer of virtual digital assets. This, along with 1% TDS (if transaction value exceeds ₹10,000), put off investors. Those with a little exposure to digital assets remained invested and paid tax on booked profits. The more savvy investors/traders found a different way out—they moved to offshore decentralised exchanges (DEX).

“If I do a ₹1 lakh transaction via a centralised exchange, I pay 0.5-1% platform fee, while another 1% is deducted as TDS. If I carry out the same transaction via a DEX, the charges are minimal,” says chartered accountant Aishwary Gupta. DEXs are a customer-to-customer arrangements without an intermediary. “Poor implementation of taxation is making people migrate to DEXs. Had it been done better, people would have stayed on centralised exchanges and government collected taxes,” says Gupta.