The latest findings of a survey by a technology policy think tank reiterate suggestions that India should consider reviewing its taxes on cryptocurrencies.
The study also found that India’s anti-money laundering rules are not enough to reverse the impact of high taxes on the cryptocurrency sector.
India should review its taxes on cryptocurrencies and not rely on anti-money laundering rules to reverse the impact of higher taxes, according to a recent survey of knowledgeable Indian investors by a New Delhi-based technology policy think tank.
According to Esya Center’s research, Indian investors are aware of regulations regarding taxation of cryptocurrencies (58 percent) and anti-money laundering (52 percent) and prefer collateralized stablecoins (93 percent) over algorithmic ones.
The survey was conducted in March and April across five major cities — Ahmedabad, Bengaluru, Delhi, Jaipur and Lucknow — and focused on 1,342 highly educated respondents.
Critically, the study found that India’s “anti-money laundering law has led to a shift in favor of equity investments over crypto investments (8 percent).”
Since last year, India has required crypto businesses to register with the country’s anti-money laundering unit, the Financial Intelligence Unit (FIU), to comply with processes under the Prevention of Money Laundering Act (PMLA).
Despite evidence-based studies by Esya and others, India has not changed the high crypto taxes it introduced in 2022.
Esya’s latest research revealed that “knowledge about tax regulations not only increases investment in crypto assets (by 10 percent) but also investment through foreign crypto platforms (by 15 percent).”
This trend has reversed to some extent, with India blocking as many as nine offshore exchanges, some of which are now registered in India.
The survey found that some Indian investors were bypassing URL blocks of offshore exchanges, suggesting that anti-money laundering laws were “not sufficient to reverse or neutralise the impact of tax regulations”.
The think tank reiterated its recommendation that the government “considers reviewing tax rules to prevent crypto assets from being moved abroad” and that “future government initiatives to encourage consumers to engage responsibly in the crypto asset market should be in consultation with crypto exchanges.”
While all survey respondents found crypto assets to be highly attractive “for additional investment opportunities and cross-border transactions,” NFTs and stablecoins were “not perceived as similarly lucrative.”
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