Understanding Crypto Assets and Digital Currency

Making sense of The Union Government's recent Budget announcements regarding the tax framework for cryptocurrencies and the Digital Rupee

The conversation around crypto regulation has once again come into the spotlight following the 2022 Union Budget announcement, in which Finance Minister, Nirmala Sitharaman announced that income from the transfer of “virtual digital assets” which includes cryptocurrencies and non-fungible tokens will be taxed at a rate of 30 percent and that no deductions and exemptions will be allowed on the same, apart from the cost of acquisition. She also announced that the Reserve Bank of India (RBI) will issue a digital rupee in the next financial year.

These announcements have been met with mixed reactions, with some groups hailing the move as a step in the right direction- rightfully away from banning crypto assets (as some feared), and instead, towards ostensibly regulating it. Others, however, bemoaned the government’s lack of clarity in defining what constituted virtual digital assets, thereby leaving the tax framework up for multiple interpretations. For instance, some of the key questions were whether debit card points would be taxable as they seem to be covered by the definition of virtual digital assets? Are mining rewards taxable? How will virtual digital assets be valued when received as gifts given that their prices are so volatile? Does taxing cryptocurrencies means that the government has legalised them? etc. The introduction of the digital rupee also needs to be examined carefully: what impact will it have on the economy? and what shape will it take once finally released by the RBI? These are unanswered questions, but important ones, nonetheless.

To make sense of these developments, Vidhi engaged in a series of deliberations through video explainers, online  events, and opinion pieces to unpack what these new announcements mean, which centred around two of our working papers, titled ‘A Central Bank Digital Currency for India – Proceeding with Cautious Optimism’ and ‘Blueprint of a Law for Regulating Cryptoassets’

On Crypto Assets

  • Our Working Paper, titled ‘Blueprint of a Law for Regulating Cryptoassets’ argues for a bespoke legal framework for crypto assets in India and presents the contours of such a law. It also highlights the challenges associated with compartmentalising crypto assets into one single category and discusses how different parameters such as nature of issuer, method of production, manner of transfer/trading, etc. may affect the classification of crypto assets and therefore, the regulatory contours. 
  • The Fintech team discussed key terms as well as global practices in regulation to discuss the myriad ways India could consider regulating crypto assets.
  • The Fintech Team hosted a panel discussion with industry experts to discuss how an effective framework can be designed to promote responsible innovation in the crypto economy as well as counter the risks posed by crypto assets. We hosted another panel discussion to highlight the opportunities and challenges associated with CBDC issuance.
  • Vidhi launched a video series titled ‘Decrypting Crypto’ to enable people to better understand cryptocurrency and its legal implications. The first video explained key definitions, the second video examined whether there was a need to regulate cryptocurrencies in India. The third video looked at possible taxation frameworks for crypto assets, and the fourth and fifth videos were a two-part ‘budget breakdown’ that discussed the new crypto tax and the introduction of the digital rupee. 
  • Yeesha Shriyan, Research Fellow, discussed how India’s proposed 30% tax on cryptocurrency income needs work and that the government should consider adopting a more robust taxation framework.
  • Aashima Sawhney, Research Fellow, wrote about how the Government should adopt a taxation framework that prioritises the nature of a transaction in a bid to build trust with taxpayers to help place India on the global map as an investor-friendly jurisdiction. She also discussed the pressing need for the government to set up an expert committee to examine the nuances of the cryptocurrency ecosystem and accordingly suggest tweaks to the proposed crypto tax framework.
  • We also interrogated the need for the government to clarify whether crypto assets qualified as ‘goods’ or ‘money’ under the existing GST framework, and what both implications could mean for Tax law.
  • We discussed why it is necessary for the government to bring crypto-assets within its regulatory framework to leverage its underlying potential and mitigate risks for investors. A ‘wait and watch’ approach is no longer feasible for India.


  • Shehnaz Ahmed, Senior Resident Fellow, was quoted stating the need for a strong privacy framework for the Central Bank Digital Currency (CBDC). She also highlighted the government’s reluctance to use the word “crypto” in the budget speech, and the wide-ranging implications of what a term like “virtual digital assets” might mean for investors.
  • In a piece for the Economic Times, Shehnaz Ahmed discussed policy motivation, CBDC design, and the impact of a CBDC on the financial and legal system.
  • We hosted a panel discussion with the Deputy Governor, Reserve Bank of India to deconstruct CBDCs and assess the opportunities and challenges associated with CBDC issuance.

Our Working paper, titled ‘A Central Bank Digital Currency for India – Proceeding with Cautious Optimism’ traces the development of CBDC in 43 countries and analyses preliminary considerations of a retail CBDC issuance in India.

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