India to launch state-backed  digital rupee _ tax crypto

India will introduce a state-backed  digital rupee and impose a 30 percent tax on profits from virtual currencies_ the government announced Tuesday.

The plans are a blow to one of the world s fastest-growing cryptocurrency markets_ which has remained unregulated despite burgeoning local trading platforms and glitzy celebrity endorsements.

They make India the latest major emerging economy to rein in the sector_ after China went even further in outlawing all cryptocurrency transactions last September.

 There has been a phenomenal increase in transactions in virtual digital assets_ finance minister Nirmala Sitharaman told parliament_ adding that the growth necessitated a proper tax framework.

Profits made trading cryptocurrencies and other digital assets will be taxed at 30 percent_ while any losses from digital transactions will not be granted offsets against other income.

A one-percent tax will be deducted at the source for all digital asset transactions above an as-yet-unspecified threshold.

Sitharaman also said the central bank would introduce a  digital rupee_ based on blockchain technology_ by the end of March 2023.

 Introduction of central bank digital currency will give a big boost to (the) digital economy. Digital currency will also lead to a more efficient and cheaper currency management system_ she said.

Cryptocurrencies have been under scrutiny by Indian regulators since first entering the local market nearly a decade ago_ with a surge in fraudulent transactions leading to a central bank ban in 2018.

India s Supreme Court lifted the ban two years later and the market has surged since_ growing by nearly 650 percent in the year to June 2021  second only to Vietnam_ according to research by Chainalysis.

Prime Minister Narendra Modi last year warned that Bitcoin presented a risk to younger generations and could  spoil our youth if it ended up  in the wrong hands.

The government soon proposed banning  all private cryptocurrencies_ but ultimately held back.

Tuesday s budget also included plans to ramp up infrastructure spending to support the economy s post-pandemic bounceback as officials grapple with rising inflation and unemployment.

Spending will be directed to roads_ railways_ defense_ housing and energy_ as the government eyes important state polls in the coming weeks.