If regulates then each transaction will be tracked properly from Exchanges that who is earning/investing in crypto. And if investor is earning profit he/she has to pay taxes as per regulation of short/long term investment return….
Since exchanges are not allowed to work in India, I don't agree with you on this one. Even if government issues some regulations regarding Bitcoin, it doesn't mean government can actually track all transactions done by traders. It can only give guidelines and it's up to traders whether they follow those or not. There will be very minute chances that government could actually catch the frauds in crytpo transactions.
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Actually, they can track the payments if they decided to. All they need to do is ask the exchanges to collect PAN details of the customers and the list of trades. If India is going to regulate Crypto transactions, exchanges will welcome the decision considering the current scenario.