New Delhi | Manich Mishra: Cryptocurrencies have attracted massive global attention in recent years and Indians are not far behind. While some countries have recognized cryptocurrency, in other countries it is completely banned. In India, there are certain rules regarding cryptocurrency, which are important to understand before investing. First, let’s understand what cryptocurrencies are and what technology are they based on.
What is Cryptocurrency?
Explaining what cryptocurrency is, Pankaj Mathpal, MD and CEO, Optima Money Managers, said that it is a digital currency based on blockchain technology which is cryptographically secured. A blockchain is a digital ledger, which can only be used by its users. He said blockchain technology is not only secure but also transparent. It is so secure that even its administrators cannot modify it for their own benefit.
Transactions with cryptocurrency
Mathpal explained that cryptocurrency is stored in a digital wallet and you can transfer it to other wallets. He said you can use cryptocurrency to buy or exchange goods or services or even take money back.
Mathpal said though, on the one hand, trading is fully regulated in the stock market. You even know after how many days from the sale of the shares, the money will come to your account. However, there is no such regulation in the case of cryptocurrencies. You can buy and sell it through brokers or crypto exchanges. Here, the identity of the seller and the buyer is not disclosed.
Why do cryptocurrency prices fluctuate?
According to Mathpal, the cryptocurrency has no underlying asset. When you buy shares, you know what the company’s assets and liabilities are. You know that the profit of the company will increase or if there is some positive news related to the company, the stock price will increase and you will make a profit. Cryptocurrency prices are only affected by demand and supply. You cannot predict how much it may fluctuate.
According to Mathpal, a provision was made in the budget presented this year that investors will have to pay a tax at the rate of 30% on the sale of cryptocurrency. He said, suppose a person buys a cryptocurrency worth Rs 50,000 and resells it for Rs 60,000 in profit or Rs 25,000 in loss, he will have to pay tax at the rate of 30%.
(Disclaimer: The above story was originally written by Manish Mishra, Deputy Editor, Dainik Jagran. It has been translated into English by Sugandha Jha, Sub-Editor, Jagran English.)