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Cryptocurrency outside the community of individuals involved in it finds itself in a very tricky position with a majority of the global population holding a sort of fear into investing in this fairly young form of virtual asset. Every person has a different reason for not getting into the crypto market this can vary from being too volatile to even calling it a scam.
Now the fear among the people can be justified by assuming they're just being very safe with their money but a country's fear of crypto is something that to an extent can be justified but after this extent, it just looks like the country and its government is very delusional. This is very much what has happened in India in the last 3 to 4 years with multiple crypto exchanges entering the country a few getting bought off by global exchanges and even the country leading globally as the country with the most number of crypto holders. But all this was achieved in a state where the country's attitude towards crypto was very informally aggressive.
The country has had multiple bans on the currency, multiple regulations that have been revoked and imposed multiple times over the last few years. The Union Budget of the country for FY22-23 changed all of these. The government not only decided to take advantage of the number of crypto holders in the country but also decided to discourage its people from entering the market the same way they tried to discourage gambling.
India is a country that has over the years found taxes to be a very effective form of discouraging its people from indulging in certain things. Be it importing high-value goods to gambling the country has enabled itself to reduce this in order to encourage local buying and hinder gambling among its population.
The gambling tax in the country currently stands at 30%. Crypto tax in the recent budget stands at 30%. When we talk about gambling again the activity is looked down upon largely due to luck being a dominant requirement. Crypto to some extent can be looked at from a luck perspective but finds an analysis of itself to be a more dominant factor. When gambling and crypto are equated to each other in some way or the other by an institution such as a government that a large population puts its trust in can lead this population into believing things like Crypto is pretty much the same as gambling.
Now, what does this do to a country with the largest number of crypto holders? Firstly, realizing profits from your holdings makes your government richer which can be considered something good when you look at the big picture. But what does this do to these investors? Not only did they have to give up a large chunk of their income but they're discouraged to get back into the market since they'll again have to give a fairly significant amount of their gains. Not everyone will be too affected by these taxes but the ones affected will be the investors who forget the existence of this tax for a minute and then realize they get only 70% of this profit.
Why will a government do something of this sort? This can have two reasons. Firstly with around 7% or 100 million people of the country's population having crypto holdings, the country finds this to be an untapped source of income that holds a tremendous amount of wealth and decided to extract as much as they could from this without getting too hated on. Secondly fear can be a major factor. Crypto and its USP being anonymity is used for all kinds of things from ransoms to illicit purchases to even bribes. Now when the government doesn't really have any way to control what goes on behind their backs in the crypto market they find discouraging their population into investing in crypto to be a better option.
Even though the government's fear is justified to a very large extent a different approach by the government into handling this wouldn't have left a large chunk of the population so disappointed and dissatisfied. A better well thought solution to the fears held by the government had the power to keep both the government and the population happy.
