Blockchain is decentralised and is designed to be immutable. The records stored in a blockchain cannot be altered, which can be of huge benefit to permanently store transactions related to property, land, stocks, among other things. This is the reason experts swear by the potential of blockchain technology when it comes to innovation.
“Blockchain will have the same profound impact emails had to the workplace when it was first introduced. It is a very impactful technology with immense potential. It is paving the way for more efficient, transparent, and less bureaucratic digital financial systems. While crypto assets have an underlying utility and benefits, we are still at a nascent stage of this revolution,” said Manhar Garegrat, Executive Director-Policy and Special Projects, at CoinDCX.
However, the recent 30 per cent crypto tax, which is applicable from today, i.e April 1, 2022, has made many people wonder about the future of blockchain technology in the country. Though the government has time and again emphasised the benefits of harnessing this new age technology, can the technology develop without crypto-friendly regulations? Can crypto tax derail the growth of blockchain technology?
“In order to continue building and innovating in this field, crypto-friendly regulations are extremely important. Lack of it is extremely demotivating for investors as well as innovators and increases the chances of talent moving out thereby hampering India’s chances of being a leader in this revolution,” said Garegrat.
Are crypto and blockchain interconnected?
Blockchain technology is the underlying technology for crypto but it has many use cases apart from crypto too, where it can be used to develop permissioned blockchains that can be used for enterprises and government in several ways.
“Definitely, the blockchain technology and the cryptocurrency are interconnected as crypto is powered by the blockchain technology itself. However, the applications of blockchain tech goes much beyond only cryptocurrencies; the same technology can be used for smart contracts, real estate, governance and voting, art monetisation and NFTs, to name a few. Blockchain technology aims to decentralise the existing financial system where the control moves from the intermediaries to the ones engaging between the information/data exchange. Maybe, that doesn’t bode well with the government, who is possibly fearing the misuse of this technology as the reason to impose stringent taxes and regulations. Ironically, the same technology has been designed to clear the clutter that has been caused within and by the existing financial system,” explains Om Malviya, President, Tezos India.
Vikram Subburaj, CEO of Giottus Cryptocurrency Exchange adds, “Crypto is a manifestation of blockchain technology in the public domain. Currently, all use cases of blockchain necessitates the exchange of an associated crypto asset. This includes transactions, governance, payment options, DeFi initiatives and well as the metaverse.” He explains that private blockchains do not necessarily need cryptos to work on blockchains as they work on the system of tokenisation. While for public blockchains one needs to have cryptos.
There are essentially two types of blockchains: public and private. Public blockchains are 100 per cent permission-less, which means that anyone can participate within the blockchain and can join the network. Experts say that the large-scale adoption of public blockchain can drive greater financial inclusion, data ownership and frictionless processes at the inter- and intra-organisational levels.
“The blockchain mechanism is focused on the consensus of a digital asset and the storage of data in a decentralised environment. When it comes to public and private blockchains, some experts believe that public blockchain requires cryptocurrency to work while private blockchains don’t. Public blockchains are decentralised and distributed. Every new block needs validation across all the computers connected to the nodes or network before they can be added to the blockchain. Due to this reason, public blockchains are immutable, meaning a record added can neither be edited nor deleted. On the contrary, private blockchains are invitation-only networks managed by one entity. They don’t have decentralisation. This is an essential component of blockchains. Many experts also argue that they are not blockchains but centralised databases using distributed ledger technology,” points out Pratik Gauri, co-founder and CEO, 5ire, which is a blockchain network company.
Is talent oultflow happening?
There is a general perception that higher taxes would force the industry to leave the country. Some people also believe that this could prompt the industry to operate underground and move innovative ideas to foreign countries.
“Even though profits from trading crypto would be taxed at 30 per cent, losses can’t be set off against other losses and cannot be carried forward. Compared with any asset or business, the crypto industry also experiences bull and bear runs. A trader could lose money in a bear market and hope to recover his investment during the bull run. Carrying forward losses will also reduce the investor’s tax burden in the long run. The government does allow shares investors to carry forward their losses. The same liberty should also be provided to the crypto traders if they incur any losses,” argued Gauri.
“While many developed countries are moving towards adopting cryptocurrencies under a regulatory framework, India is still in the deliberation stage. This will hurt India’s ability to gain leadership in blockchain technology. Without a functional and thriving investor ecosystem in crypto assets, blockchain based companies will not be incentivised to set shop in India which will dampen the prospects of job creation as well as in enabling,” said Giottus’ Subburaj.
Crypto is a new and upcoming industry. For, Garegrat, those working in the crypto and blockchain industries are encountering new problems and coming up with new solutions every day.
“There are risks and challenges in terms of technology, safety, compliance – to name a few – but we’re certainly making progress when it comes to finding solutions. Every new technology comes with its fair share of risks and challenges. But shutting out isn’t the solution. Building compliant and safe solutions is what we must focus on. Adopting these new technologies is important and will prove to be good for the economy.”
