The Crypto Businesses in India are booming. In the present day, it’s almost impossible to live our daily lives and not come across advertisements for something that is related to Cryptocurrencies. Some call it a bubble some call it the future. It has become one of the fastest-growing industries. Do you also want to start your own crypto business? A crypto business could help you gain a lot of capital in a much shorter amount of time in comparison traditional businesses. However, before starting your crypto business you need to know about the regulations on crypto business in India. In this article, we will take a brief overview of the regulations on crypto businesses in India.
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What is Crypto?
Crypto meaning cryptocurrencies are a digital form of currency. It provides an alternative mode of payment which, is created using encryption algorithms. Bitcoin is the most commonly known cryptocurrency. Some of the other cryptocurrencies are, Ethereum, Litecoin, Dogecoin, etc. The use of encryption technologies means that cryptocurrencies function as both a currency and an accounting system. The main aim of cryptocurrencies is to get rid of the stranglehold that the banks have on the economy. Up till now the banks keep a record of all our finances and deal with the transactions. Crypto aims to change this. The most important goal of crypto is to create a decentralized economy of virtual currency. Where no one institution can control the entire system.
Blockchain Technology- The Soul of Crypto
If you want to understand crypto you need to first understand blockchain. Blockchain is what has built the crypto industry into what it is today. It is the very soul of crypto. Without blockchain, there would be no cryptocurrencies. A blockchain can be most simply said to be a decentralised ledger, that is used to keep a record of the digital assets.
Acceptance of Crypto in India
Crypto was not recognised as an asset in India till February, 2022. Now, they are considered as a Virtual Digital Asset(VAD). Though, they are still not considered as a legal tender. The Finance Minister, Nirmala Sitharaman, announced during the 2022 Budget that the profits made from cryptocurrencies will be taxed. Further, there will be a tax levied on payments made for the transfer of VAD’s. As the State can not tax anything that is illegal, the 2022 Finance Bill has further helped the validity of cryptocurrencies.
Cryptocurrency Exchange
A crypto exchange is a platform on which you can buy or sell cryptocurrencies. It is an online marketplace. Further, it operates similar to online brokerages. You can use one crypto to buy another. For example, using Bitcoin to buy Ethereum. Otherwise, you can convert your crypto into regular currency (INR) and vice versa. In its truest essence, a crypto exchange is a mediator that helps connect a buyer and a seller. The platform makes money via, commissions and transaction fees.
Starting a Crypto Businesses in India
By Crypto Business, we usually mean, Cryptocurrency exchanges. Though, it may be quite complicated to start a crypto business. You have a lot of tools available to you. That can help you overcome the problems. However, before starting a crypto exchange you need to consider a few things such as,
- What kind of exchange do you wish to establish
- Do you want to collaborate with a bank or other financial institution for the transactions on your business platform
- The liquid cash you’d need to operate the business
- The security of your platform
- The kind of customer support you want to provide
In general, there are two main approaches to starting an exchange. You could make the platform from scratch. Or, you could launch your platform using a white label crypto exchange software. The latter is a much more cost-effective & secure way to launch your platform. Some of the benefits of using a white label cryptocurrency exchange software are,
- They provide you with provide customizability
- You can monitor the work progress
- You can launch the platform on a test basis (Beta Module)
- It can fast-line the launch, you can launch as fast as within a week
- They provide you with a secure and bug-free platform
- It can also provide you with advanced trading features.
Documents Requirement
When starting a crypto exchange you will need to register your business as some type of business entity. Apart from the documents you require for registering as business entity, you will also require a,
- PAN (Permanent Account Number)
- TAN (Tax Deduction and Collection Account Number)
- GSTIN (Goods and Services Identification Account Number)
Regulations on Crypto Businesses in India
At present, there is no specific law or licence that is applicable to a crypto exchange that is operating in India. However, depending upon the type of business entity you register yourself as you will need to follow the regulations. If you register your business as a company, then you will have to follow the regulations of the Companies Act, 2013. on the contrary, if you’ve register as a Sole Proprietorship. Then, you will have to follow the Shop and Establishment Act.
- 2022 Budget: As per the Finance Bill, 2022 all crypto profits will be taxed at a flat rate of 30%. No deductions, except the cost of acquisition is allowed while reporting the taxes. Further, the infrastructure cost of setting up a crypto-mining asset can not be used as a cost of acquisition. Further, there will be a 1% tax levied on all the transactions made that is, related to cryptocurrencies. This 1% tax is levied in the form of TDS (Tax Deducted at Source). Further, in the 2022 budget, it has been made clear that one can’t use the losses made from one digital currency to offset the profits made from another currency. These regulations will come into force from July 2022.
- Other imposed regulations: The Advertising Standards Council of India (ASCI) has also issued guidelines about how you can advertise and promote your crypto business. In general, you’d have to impose a disclaimer about the unregulated nature of cryptocurrencies. Further, the Ministry of Corporate Affairs has made it mandatory for companies dealing with cryptocurrencies to disclose the transactions made and the amount of cryptocurrency that you hold. Moreover, you need to keep a KYC of all your customers registered on your platform.
Conclusion
You can very easily start your own crypto business. Though there are certain hurdles that you have to overcome. However, this could be one of the best opportunities to establish your dream of strating your own crypto business. Some of the exchange platforms have already made a name for themselves. However, there isn’t a company that controls the entire exchange market. You can use the opportunity to establish your company at the forefront of the crypto business. Though, the government is imposing certain restrictions on the crypto businesses. Its policies on crypto businesses are also helping legitimise the sector.
