Synopsis: A recent surge in cryptocurrency investments is being led by Gen Z, lured by quick profits and global support for digital assets. However, with no legal backing in India and significant risks involved, investors should tread cautiously.
Crypto Craze or Risky Hype? Why Gen Z Is Rushing In – And Why You Should Be Careful
India is witnessing a renewed wave of cryptocurrency enthusiasm, particularly among Gen Z. A recent report highlights that 71% of crypto investors in the country are under the age of 35. With Bitcoin recently surpassing ?1.2 lakh (approx. $1,20,000) and delivering a 90% year-on-year return, the allure of fast profits is hard to ignore.
The momentum gained further traction after the US approved spot Bitcoin ETFs, along with the passing of the GENIUS Act. This legislation not only legitimizes stablecoins—digital tokens backed 1:1 by US dollar assets—but also allows for the creation of a US Strategic Bitcoin Reserve, adding institutional credibility to cryptocurrencies.
However, India stands in sharp contrast. The Reserve Bank of India (RBI) has maintained a cautious stance, warning that cryptocurrencies pose systemic risks to financial stability and could undermine monetary policy. Cryptos are not recognized as legal tender in India, leaving investors in a regulatory vacuum.
Adding to the uncertainty are multiple instances of security breaches on popular platforms like WazirX and CoinDCX. In WazirX's case, investors are still waiting for their funds even after a year. The crypto market is also plagued by scams like Ponzi schemes, pump-and-dump tactics, phishing, and social engineering, making it a risky playground for the uninformed.
On the tax front, cryptocurrencies are treated akin to gambling. A flat 30% tax applies irrespective of your income bracket, along with a 1% TDS on transactions over ?10,000. Non-disclosure or improper filing of crypto earnings can lead to severe penalties—ranging from 50% to 200% of the tax due, depending on the nature of the misreporting.
Investors are advised to keep comprehensive records including TDS certificates, exchange statements, and transaction logs to ensure smooth Income Tax Return (ITR) filing and safeguard against future legal challenges.
Bottom Line: With no regulation, high taxation, security concerns, and no legal protection, investing in cryptocurrencies in India is a high-risk proposition. Those already invested must perform due diligence on the platforms they use, checking for insurance cover, liability clauses, and robust security protocols.
Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. Cryptocurrency investments are inherently risky and should be undertaken only after thorough research and consultation with a certified financial advisor.
