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Below  the Union Budget Expectetions 2024 by Manhar Garegrat, Country Head, India & Global Partnerships at Liminal Custody Solutions

As India strides towards the forefront of the digital asset revolution, secure custody solutions are laying the foundation for a new era of financial inclusion. However, unlocking the full potential of this transformative asset class demands a robust ecosystem built on clarity, innovation, and talent. The upcoming Union Budget 2023 presents a pivotal opportunity to pave the way for a thriving digital asset landscape, and Liminal proposes the following key expectations:

1. Clarity in VDA Definition and Tokenization:

The current broad definition of Virtual Digital Assets (VDAs) in Notification no. 74 of 2022 needs to be more nuanced. The tokenization of real-world assets is a $10 trillion opportunity and we are already witnessing the rapid advancements in the field of tokenized RWAs. There is an urgent need for investment and innovation in these segments, if nurtured with progressive policies, India has the potential to become a global leader in the digital asset space. We urge the government to amend the VDA definition, explicitly excluding tokenized assets with proven underlying value, similar to established precedents like gift card exemptions. This targeted revision will foster a dynamic and inclusive digital asset ecosystem.

2. Removal of 1% TDS:

The introduction of a 1% Tax Deducted at Source (TDS) in 2022 led to an estimated loss of $420 million in potential government revenue due to migration of Indian crypto traders to overseas platforms. This highlights the detrimental impact of policies that disincentivize domestic participation in the digital asset market. We propose offering tax breaks for the development of blockchain security infrastructure and the implementation of advanced security protocols. This incentive will attract investment, generate high-skilled jobs, and solidify India's position as a global leader in secure digital asset custody. Just like stocks, users should be allowed to offset losses related to digital assets which will encourage more startups to enter this space. Government should look at creating special economic zones for Web3 startups and offer tax holidays to startups during initial years so that entrepreneurs can focus on innovation and product development without worrying about cash flows.

3. Prioritising Research and Development:

We urge the government to create equal opportunities for Web3 projects by enabling active participation in government sandboxes. The requirements for inclusion in government sandboxes should be more relaxed to create a more inclusive and encouraging Web3 startup ecosystem. Excluding digital assets from such initiatives may not unlock the full potential of blockchain projects and could limit their viability in the long-term. Fostering a culture of innovation in blockchain-based security solutions and compliance tools is crucial to ensure the resilience and sustainability of the digital asset ecosystem. India's vibrant tech landscape presents an ideal breeding ground for developing cutting-edge technology solutions. We call for strategic investments in research and development (R&D) initiatives specifically focused on digital asset security and compliance. This commitment will empower Indian companies to contribute significantly to global solutions and maintain India's competitive edge in the digital asset space.

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