The past month has been a big one for crypto regulation. World powers are starting to put serious government effort behind implementing policies for the asset class. Of course, some countries are taking a more hands-off approach. But others still are looking to seriously crack down on cryptos, citing their use in money laundering and other illegal activities. This month, investors anticipate that the U.S. will start forming its official crypto policy. Ahead of that, India is crafting its own stance. How might the new India crypto tax shape our expectation of the incoming U.S. crypto policy?
Every country is coming to terms with the fact that cryptocurrencies are forever changing our financial system. And as this happens, each country is navigating their own reaction to the revolution. For example, China chose to ban crypto trading and mining and has instead focused efforts on its own central bank digital currency (CBDC).
Now, it’s the United States’ turn to get in on the policy action.
President Joe Biden is preparing an executive order regarding cryptocurrency, and the order could come as early as February. Meanwhile, lawmakers are descending on Capitol Hill to discuss cryptocurrencies. These meetings will cover topics like crypto mining and stablecoins, and will plant the seeds for legislation. Right now, investors are playing a guessing game of what this legislation might look like.
Could India’s new crypto tax provide an answer?
India Crypto Tax Could Look Similar to U.S. Crypto Policy
India, for its part, initially discussed banning crypto entirely. Some lawmakers went so far as to call for jail sentences for those completing crypto transactions. Luckily though, India is coming around, and it seems like lawmakers want to find a better path for crypto regulations. News of a new India crypto tax proposal have been generating chatter, perhaps offering a glimpse of what could come in the U.S.
First and foremost, the country is looking to tax crypto gains. It’s looking to do this with a hefty 30% tax on capital gains from crypto. The tax rate is getting a lot of flack — Binance founder Changpeng Zhao criticized the figure on Twitter earlier.
It’s highly unlikely that a 30% capital gains tax on crypto comes to fruition in the U.S., given the likely pushback. But, enacting a capital gains tax as a path toward wider adoption is something investors anticipate in the U.S.
The most notable, and more likely regulation India presents is the roll out of its own CBDC. Following in the footsteps of China, India will be one of the first nations to have its own dedicated crypto. Finance Minister Nirmala Sitharaman says this CBDC is expected in 2022 or 2023. That piece of news is noteworthy for Americans for several reasons. First, it shows that there is a race beginning for nations to adopt CBDCs — a race that the U.S. is keen on joining.
It also suggests what the timeline might look for the U.S. to implement its own CBDC, if it chooses to. India and the U.S. showed interest in CBDCs around the same time. If India expects a CBDC to be ready before the end of next year, U.S. investors could reasonably expect the same.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.