Crypto Boom Sparks Regulatory Alarm in India
India's tax authorities have raised concerns over the growing difficulty in monitoring digital asset earnings, as more users turn to offshore platforms and decentralized networks. The income tax department highlighted during a recent parliamentary meeting that encrypted transactions are creating significant enforcement blind spots.
Borderless Transfers Undermine Tracking Efforts
The near-instant, cross-border nature of crypto transfers allows funds to bypass traditional financial gatekeepers. With no central intermediary, reconstructing transaction trails across jurisdictions has become increasingly complex, especially when anonymized wallets and non-custodial protocols are involved.
Tax Framework Faces Practical Shortcomings
While India imposes a flat 30% tax on crypto gains and a 1% TDS on transfers, the system’s refusal to allow loss offsetting has drawn criticism. Market participants argue this creates disproportionate burdens, discouraging transparency rather than encouraging compliance.
- Offshore exchanges operate beyond local jurisdiction
- DeFi platforms enable permissionless transactions
- Private wallets obscure ownership trails
- Multi-hop transfers hide end beneficiaries
A Call for Smarter Oversight Mechanisms
Experts suggest integrating blockchain analytics with adaptive regulatory models to enhance visibility. Strengthening global cooperation on data sharing could also be pivotal in closing the enforcement gap in the evolving digital economy.