With the Indian government like to introduce a bill on cryptocurrency in the upcoming winter session of Parliament, the existing holders have started selling their crypto holdings in panic. Besides, the value of Bitcoin has dropped by 18% in terms of Rupees while the price of USD Tether (USTD) is down by 17%.
Reason behind panic selling?
As per the Lok Sabha website, the lower house of the Parliament doesn’t use the word ‘ban’ rather it mentions three main factors – the creation of an official digital currency, prohibition of private cryptocurrencies, and certain exceptions to promote the underlying technology of cryptocurrency and its uses. Swapnil Pawar, Founder of ASQI Advisors (SEBI-Registered) stated that this scheme does not sound as bad as people have been predicting. Besides, he mentions that the agenda of the winter session is “exactly the same as it was listed earlier in January. But a lot of things have happened since then.”
Recently, the government opposed the advertisements promoting cryptocurrencies assuring some X percent of returns which might be higher than fixed deposits. This might have lured several unsuspecting investors. “That shouldn’t happen,” said Pawar while talking about the regulations that may try to control such misleading investors.
Are you a new holder?
Most experts are at present are advising against buying cryptos as the draft Bill is to present in the Parliament hardly in a week or two. They are also ideating that an outright ban on cryptocurrency is unlikely to happen. “They may not allow cryptocurrencies to be used as currencies, which is anyway not done in India, as yet. The government may do this in order to protect our own legal currency, the Rupee,” said Pawar.
Pawar asserts that the cryptos might be included in the asset class and place under a regulatory body such as SEBI, which will enable to fix the taxation rules.
Even the chartered accountants are confused on how to tax cryptocurrencies and thus are treating gains under the ‘income from other sources’ head and taxing them as per the individual’s slab.
Sajai Singh, Partner, JSA Associate, and Solicitors stated: “Whatever the Government decides, it will take into account current holdings of people and not jeopardise the same. It is the investor and his hard-earned money that is paramount in the Government’s mind. They want to protect both, so one can expect current legitimate holders to be protected in any upcoming framework.”
Should you sell or buy?
While waiting for the decision by the parliament on cryptocurrency, Pawar said that some smart investors can likely take advantage of the situation and buy on dips. However, he advised staying away from it for now.
Besides, the existing holders should not be selling out their holding and keep it intact thus avoiding panic. It is tough to take a call on what the government will decide, what will it allow and not allow.
