The Income Tax department in its first survey on the trading of cryptocurrencies like Bitcoin has found that there are six lakh active cryptocurrency traders in nine cryptocurrency exchanges across the country. The survey carried out in Bengaluru in the second week of December was to gather evidence for establishing the identity of the investors and traders, transaction undertaken by them, identity of the counterparties, related bank accounts used, etc.
According to The Indian Express, the survey found that cryptocurrency worth Rs 17,800 crore has been traded on the exchanges, with a 25-year-old who invested Rs 25 lakh holding Rs 360 crore in bitcoins after carrying out trade worth Rs 760 crore, since the initial investments in the decentralised currency.
The state unit of the I-T department has advised counterparts across the country that cryptocurrencies held for long periods of time by investors should be viewed as capital assets. Similarly, cryptocurrencies of frequent traders of the virtual currencies should be seen as business income. While economists have called cryptocurrency an asset bubble, the I-T department is looking at holdings in the trust-based virtual currency system that evolved on the Internet for tax assessments. “The wealth in cryptocurrency is notional unless the currency is liquidated. We have not been able to find the amount that has been liquidated and this exercise is still on. It is a difficult task since there is no trail available of the liquidation,’’ an I-T official was quoted saying by IE.
The IT official said a key factor which helped the department track the total number of investors in the cryptocurrency market was the strong KYC policy (Know Your Customer) followed by the currency exchanges — while there are 11 such exchanges across the country, only nine are active. “While there are 25 lakh people registered to trade in cryptocurrencies, only six lakh have provided the KYC details that are mandatory for trading, and only these people have traded on the exchanges,’’ said the official. Most of the people active on the crytocurrency exchanges are in the 25-35 years age group, tech-savvy and keenly aware of the cryptocurrency market. Cryptocurrencies are based on blockchain technology, and as many as 1,381 types of these currencies are reported to be in existence. The most well-known is Bitcoin, which currently has a market cap of $283 billion.