The government lacks VDA regulation and data, leaving the crypto community uncertain.
The WazirX hack caused a $230M loss; recovery efforts were deemed inadequate.
The Indian crypto community is facing turmoil following a major hack involving WazirX, one of the country’s largest centralized exchanges. The multi-signature wallet breach resulted in $230 million worth of assets being stolen. The recovery measures undertaken by WazirX have been widely deemed unsatisfactory, and the government’s lack of involvement has exacerbated the situation. This incident compounds the longstanding grievance regarding the 30% tax on crypto transactions.
WazirX is being embroiled in controversies, including its lack of insurance coverage for such incidents. CEO Nischal Shetty indirectly criticized the government, stating, “Insurance is not easy for an industry that is so new in India… Forget insurance, we still don’t have access to proper banking channels.”
Further complicating the issue, recent Lok Sabha unstarred questions by Lok Sabha member G M Harish Balayogi to Finance Minister Nirmala Sitharaman inquired about the government’s stance on Virtual Digital Assets (VDAs).
The questions sought details on whether the government researched the current status of VDAs in the country, and the number of corporations or platforms working with VDAs over the past five years. And any proposals to legislate the regulation of VDA sales and purchases.
The Minister of State in the Ministry of Finance, Pankaj Chaudhary, responded, stating, “Crypto or VDA are unregulated in India and the government does not collect data on these assets”. Also, added that there are “no proposals to bring legislation for regulating the sales and purchase of VDAs.” The minister also emphasized that “Law Enforcement Agencies (LEAs) have the mandate to address illicit activities under existing legal provisions.”
Indian Crypto Community In Distress?
In the recent budget announcement for 2024-2025, Indian Finance Minister Nirmala Sitharaman left the existing crypto tax rules unchanged. The primary demand from the crypto industry was to reduce the tax-deducted-at-source (TDS) on crypto transactions from 1% to 0.01%. Despite presenting evidence from multiple sources, including a think tank study supporting the reduction, the government did not amend the policy.
Additionally, the industry has advocated for progressive taxes on gains instead of the flat 30% rate. And the ability to offset losses against gains. The call for multi-agency regulation has also gone unheeded.
The government’s stance, coupled with the recent hack and tax issues, has left the Indian crypto community in a state of distress, questioning the future of cryptocurrency in the country.
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