India to launch digital rupee and tax cryptocurrencies

India will launch a state-backed “digital rupee” and impose a 30% tax on virtual currency profits, the government announced on Tuesday.

The plan is a severe blow to one of the fastest growing cryptocurrency markets in the world and hitherto unregulated despite the explosive rise of local trading platforms.

“There has been a phenomenal increase in digital virtual goods transactions,” said Indian Finance Minister Nirmala Sitharaman as she presented the public budget to Parliament.

She added that this growth requires an adequate regulatory framework.

As a result, profits from operations in cryptocurrencies and other digital assets will be taxed at 30%, and losses cannot be offset against other income.

Sitharaman further announced that the Central Bank will launch a technology-based “digital rupee” by the end of March 2023.

“The introduction of the Central Bank’s digital currency will give a strong boost to the digital economy. The digital currency will also lead to a more efficient and cheaper system of monetary management”, added the minister.

Cryptocurrencies have been in the crosshairs of Indian regulators since they entered the local market nearly a decade ago.

The rise in fraudulent transactions even led to a ban by the Indian BC in 2018. India’s Supreme Court lifted the ban two years later. Since then, the market has skyrocketed, with growth of nearly 650% in the 12 months to June 2021, according to research by Chainalysis.

Last year, Prime Minister Narendra Modi warned that bitcoin is a risk to young generations, and his government considered banning “all private cryptocurrencies”. Ended up giving up.