Nidhi Bhardwaj: As the budget session approaches, uncertainty is starting to loom over startups and various organizations about the potential fate of blockchain companies. This time around, experts are eagerly anticipating a streamlined tax regime, along with financial support for cryptocurrencies, digital assets and small startups, compared to the 2022 government budget decision.
Blockchain systems could account for 10% of global GDP by 2025, according to a World Economic Forum report. By eliminating the requirement for intermediaries, experts believe blockchain technology could disrupt the global economy and nearly every sector.
Recent studies have confirmed the influential effects of blockchain technology on various sectors given transparency, trustworthiness, security, accessibility, and cost-effectiveness. These factors have led many sizable organizations to move from centralized finance (CeFi) to decentralized finance (DeFi). Even the World Bank, in one of its reports, said there is a growing global demand for blockchain to provide banks and other financial institutions with a transparent and secure payment system.
Blockchain economic potential by industry
According to a McKinsey report, the potential value created by blockchain will vary across sectors, with the public sector perhaps being best positioned in terms of potential impact and feasibility of applications.
Does the Growing DeFi Sector Need Government Attention?
DeFi has just 1,000 developers managing smart contracts worth more than $100 billion, according to a study by crypto asset management firm Electric Capital. The numbers show a talent shortage as demand rises in blockchain companies. According to Statista, the demand for blockchain developers is growing 300-500% annually as more and more companies deploy smart contracts and build blockchain apps.
As the 2023 budget approaches, Pratik Gauri, co-founder and CEO of 5ire, a layer-1 blockchain company designed around economic and environmental sustainability, says this lack of talent is a constraint on startups. I recognized that it was. “To meet the growing blockchain talent standards, we expect the government to establish training institutes to build skill development infrastructure in blockchain,” he said.
“Government will support early stage funding in several sectors of blockchain and Web3, PLI (Production Linked Incentives) as well as industrial We need to establish a fund for early-stage capital for oriented investments in this ecosystem,” added Gauri.
Furthermore, out of the 2 million or so professionals with IT skills, only 5,000 are experts in blockchain,” said Jagdish, chief growth strategy officer at Tech Mahindra, at the Business Today conclave in March 2022. says Mitra. In India, talent recruitment and development are key raw materials along with capital to capitalize on new opportunities,” he said.
What do experts think about GST rebates and taxes in the 2023-24 budget?
After the introduction of a 30% cryptocurrency tax in the last budget, the market crashed for many blockchain enthusiasts, regardless of personal income tax rates.
In an interview with India Today, the India-based exchange, WazirX, said, “We will scale our spending this year from the date (January-July 2022) to the same period last year (January-July 2021). By comparison, we note an 88% decrease in spending, which was cut in the second half of last year and has been cut further since Q1 2022.”
“The government is expected to use corporate tax and GST rebates to subsidize companies in the blockchain industry. This includes tax incentives for companies involved in creating and applying blockchain technology, and GST exemptions for transactions carried out using blockchain.Governments will provide financial support to entrepreneurs developing blockchain-based solutions and to blockchain research and development. It’s possible, said Asif Kamal, CEO of ArtFi, a blockchain-based art company.
“The previous Union Budget introduced a 30% tax with no offsetting options for losses on other virtual digital assets. We need to change it so that it does,” said Gauri.
“Blockchain companies in India expect the government to provide a clear and favorable regulatory framework for this sector. It could include rules on the application of technology,” Kamal said. in discussion.
“Governments are expected to offer tax incentives and rebates to encourage the growth and development of new industries such as blockchain startups,” said Unocoin co-founder and CEO. Sathvik Vishwanath believes.
Overall government outlook for blockchain industry from 2022
In a recent statement by RBI Governor Shaktiankta Das at the Banking & Economy Summit in Mumbai on January 12, he explicitly said he would ban cryptocurrencies, but at the same time said he would support blockchain technology. Few pundits have actually felt overwhelmed by such a statement as reported, but nonetheless speculate enthusiastically about the next budget for 2023-24.
To draw attention to the government’s interest in this sector, a recent pilot project initiated by Niti Aayog in January 2023 was launched to work with the Himachal Pradesh government to develop agricultural products by integrating blockchain technology. promoted exports. Commenting on this, Ankit Wadhwa, co-founder and CEO of Rario, said, “Governments are adopting blockchain into their systems and given the current steps, this will give natural farming a technological boost. He further said he welcomes the growing government interest in blockchain in banking, sports, gaming, agriculture and energy sectors.
“We hope India will be at the forefront of blockchain innovation during its G20 presidency,” Wadhwa said.
Some experts expect the upcoming budget to support the growth of ReFi, or regenerative finance, as more start-ups and tech giants turn their attention to this technology to support low-carbon technologies.
ReFi has gained significant mainstream attention and adoption over the last few years. Nikhil Goyal, CEO and founder of Beyond Imagination Technologies, has proven how blockchain can have a tangible impact on the physical world, accelerating the world towards a more sustainable low-carbon economy. “The government should support ReFi blockchain startups and companies in its 2023 budget, giving the sector at least an initial level of traction,” he believed.