Modi Fractured Mandate: What to expect for Crypto and Web3 in India

As a crypto investor with experience in the Indian market, I’m closely watching the political developments and their potential impact on the crypto industry. The fractured mandate of the new coalition government, which may depend on coalition partners for major policy decisions, could potentially open doors to negotiations and lobbying for liberal regulation policies.

As a researcher studying the political landscape of India, I can share that in the most recent parliamentary elections, I observed that the current Indian Prime Minister, Narendra Modi, and his coalition emerged victorious with a parliamentary majority on Tuesday, 2021. However, it’s essential to note that this victory came with a fractured mandate.

Modi is poised for his third term as India’s prime minister, but the surprising election results in a fragmented mandate took the Indian stock markets by surprise. The benchmark sensex index dropped by over 4500 points in one day, resulting in significant losses for investors amounting to several million Indian rupees.

As a crypto market analyst, I’ve noticed that the Indian crypto community, closely monitoring political shifts, has maintained a measured response so far. Investors are anticipating renewed discussions on cryptocurrency regulations within the context of the newly formed Modi 3.0 cabinet.

As a crypto investor based in India, I’ve come to terms with the fact that our country imposes one of the highest tax rates of 30% on crypto gains. This taxation policy, combined with the skeptical stance taken by the government and central bank towards cryptocurrencies in the past, has left many of us in the Indian crypto community feeling disheartened.

The Indian government, although cautious about cryptocurrencies, has shown a favorable stance towards the implementation of blockchain technology and web3 infrastructure in the realm of governance and regulated industries.

NITI Aayog, India’s premier public policy institution, initiated pilot projects involving blockchain technology in pharmaceuticals and fertilizers logistics, land records, and university certificate verification as early as 2019. The Ministry of Electronics and Information Technology (MeitY) of the Indian government published a white paper in 2021 outlining India’s roadmap for blockchain technology advancement in the upcoming years.

It’s important to find out if the newly formed coalition government in India will take a more lenient approach towards cryptocurrencies and what their plans are for advancing web 3 technology.

Fractured Mandate Key to Success ?

It’s important to recognize that Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP) did not secure a clear majority in this election as they had in the previous two general elections in India. Consequently, the Modi administration will need to work closely with its coalition partners to pass legislation and implement significant policies. There are even rumors that a new finance minister may be appointed in the upcoming cabinet, potentially replacing Nirmala Sitharaman who has been vocal in her opposition to cryptocurrencies and their potential legality in India.

As a researcher studying political dynamics, I’ve observed that while it’s commonly believed that strong, mandated governments are best suited to make significant policy decisions, a fractured mandate of coalition parties could present unique opportunities. These opportunities lie in the realm of diplomacy and negotiations – something that the crypto community in India might find intriguing if they perceive potential for lenient regulatory policies.

As a cryptocurrency and Web 3.0 analyst, I’ll take you through the evolution of these technologies in India over the last five years and provide insights into potential developments during a hypothetical third term for Prime Minister Modi.

Bill For Banning Crypto

In 2019, an inter-ministerial committee established by the Modi administration recommended a complete prohibition on privately traded cryptocurrencies in India, imposing penalties on individuals participating in any crypto-related activities. This proposal was put forth by the then finance secretary Subhash Chandra Garg, who led the committee, in the form of the “Banning of Cryptocurrency and Regulation of Official Digital Currency” bill. The committee expressed admiration for decentralized ledger technology (DLT), also known as blockchain, and suggested implementing it in various sectors such as banking, insurance, financial services, and more to enhance transparency and operational efficiency. Furthermore, the Indian government was encouraged by the committee to consider creating a central digital currency.

No Ban but 30% tax on crypto: Indian Govt

Although the Indian parliament failed to pass the “Banning of Cryptocurrency and Establishing the Digital Rupee as an Official Digital Currency” bill, it responded by imposing a 30% tax on income derived from cryptocurrencies for individuals, businesses, and entities within India. Additionally, a 1% Tax Deducted at Source (TDS) was implemented over such gains. The Reserve Bank of India (RBI), the Indian central bank, issued a directive prohibiting all regulated banks from engaging in crypto transactions due to concerns regarding “consumer protection, market integrity,” and “money laundering.” This action prompted numerous crypto investors in India to seek alternatives.

Indian Govt’s Current Stance on Crypto 

The Indian Ministry of Corporate Affairs (MCA), which regulates corporations in India, has previously warned that cryptocurrencies are based on misleading promises of enormous profits. Furthermore, the MCA characterized the trading and generation of crypto assets as “Ponzi schemes” – a form of investment fraud.

India’s Finance Minister Nirmala Sitharaman has maintained a somewhat unclear stand on cryptocurrencies. She explained more recently that the administration’s perspective has consistently been that crypto assets can be bought and sold. However, the government hasn’t regulated these digital currencies up to this point and has no plans to alter that approach for now.

Overall Web 3 adoption in India : What experts say?

Although the government harbors some doubts about cryptocurrencies, it has generally shown a favorable stance toward the broader advancement of web3 technology in India. (Web3 refers to the decentralized internet including blockchain technologies and digital tokens.)

The Indian administration recognizes the promise of blockchain technology in addressing underlying issues such as corruption, expensive operations, inefficiency, and a lack of transparency within its governance structures. Additionally, they are putting resources into building out web 3 infrastructure, as this technology is increasingly being utilized to oversee the administration of smaller towns and villages across India.

As a researcher studying the emerging technology landscape, I strongly believe that Web3’s decentralized essence empowers individuals, creating a more equitable digital environment irrespective of those in power. I am convinced that the incoming administration will recognize its potential and establish regulations to support its adoption. The exponential growth and significant economic and societal implications of Web3 make it an alluring area for government backing. This transition is imminent, and the moment for Web3 is upon us.

What Crypto Lovers want and what they can expect from Modi 3.0

Cryptocurrency advocates in India are pushing for various improvements, including a decrease in the TDS rate from 1% to 0.01%, as well as other significant changes like reevaluating taxation on digital assets, providing regulatory certainty, and establishing economic zones to boost Web 3 development in India.

In India currently, crypto enthusiasts face a limited number of options when it comes to political representation and advocacy for their cause. Mainstream political parties or politicians have yet to fully embrace the crypto community’s concerns. Even with a new government in power, it’s unlikely that cryptocurrency will be a top priority due to their past actions.

The fragmented political scenario has created an opportunity for discussions surrounding current laws and cryptocurrency regulations in India. It remains to be seen if the crypto community can effectively voice their concerns to any political party in the near future.

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2024-06-05 11:01