Ajay Konale, 28, started dabbling in the cryptocurrency market in 2020. But he did not get into it for the money. Not directly, anyway.
Konale, a Bangalore-based chartered accountant (CA), had just started his own auditing firm with a partner and he identified a clear dearth of qualified accountants to advise investors who are part of India’s burgeoning cryptocurrency market.
It was a new world, seemingly different from the work CAs have been doing. But Konale firmly believed that “a traditional practice will have a limited future.” He dived into cryptocurrencies, starting as an investor.
“The fundamental accounting principles are the same for crypto currencies. But traditional CAs are not familiar with the ecosystem, so they run away,” Konale said.
“That’s why I started investing. I wanted to understand the ecosystem before getting into accounting it,” he added.
Konale is among a handful of Indian CAs who, over the past five years, have taken the plunge into the crypto current market, offering their services to investors. And with 2022-23 being the first year of the Indian government levying a 30 per cent tax on cryptocurrency transactions, the role of these CAs has become even more important.
Crypto specialist CAs
According to data from Tracxn, a start-up tracking firm, investments in India’s cryptocurrency market swelled 15.5 times to $438.18 million in 2021.
Most cryptocurrency accountants, like Konale, are young, in their late 20s, and while Konale’s auditing firm offers other regular auditing services as well, there are some who have decided to specialise in cryptocurrency. The clients of these firms are also mostly in the age group of 20 to 40 years from Tier-1 and Tier-2 cities.
“There was a considerable lack of knowledgeable advisors before 2020,” said 29-year-old Anoush Bhasin, founder of Delhi-based Quagmire Consulting, which solely focuses on crypto assignments. But the Supreme Court’s ruling against the Reserve Bank of India’s ban on crypto currencies in 2020 and the Covid pandemic changed it all and the industry also started to look more creditable.
“Now with the new tax rules, a number of CA firms are jumping in,” added Bhasin who quit his job with one of the Big Four audit firms in 2018 to pursue a “more thrilling” career.
“Having developed a keen interest in Bitcoin, I saw a huge vacuum in crypto-friendly regulatory and tax advice in India. I decided to help investors, traders, entrepreneurs to legitimately enter and exit the crypto market,” Bhasin said.
Bhasin’s clients are mostly high frequency traders, long-term investors, high net-worth individuals, software developers and consultants. And they are all young with a considerable risk-taking appetite.
Abhinav Soomaney, 28, started his accounting career with crypto assignments with a firm in the United States.
“I was lucky to get into this space when cryptocurrency taxes were just being discussed (globally). A colleague and I sat together and created a template for crypto taxation. We are using the same template today in India,” Soomaney said. In 2020, he founded Cryptotax International, the Indian arm of which is working on a new software for the Indian market to help investors directly link their exchanges and get the tax calculation in just a few clicks.
“Right now, Indian clients are not worried about tax. We get calls from people enquiring about what we charge and when can we get started,” said Soomaney. He has over 300 clients, mostly international, who he has been assisting on and off. “There is a great demand because there are very few accountants doing it.”
Not a market for everyone
One reason the crypto space has fewer accountants auditing it is because of the inherent challenges in it—lack of clarity on the regulatory framework within India, the government’s cynical approach and the history of frauds associated with cryptocurrencies.
“There are a lot of fraudulent activities, and we have also helped clients recover funds, at least partially. Scams and frauds still persist because the market is unregulated,” said Mitesh Nagori, 44, who has his own firm in Mumbai, CA Mitesh and Associates.
“If you don’t know the right approach, then there are chances that you might be dealing with people who are untrustworthy,” Nagori said, adding that many crypto exchanges in India have gone bust because of the various challenges, but people are willing to take the risk because the returns can be “very rewarding.”
Nagori, however, cautions his clients. “It is still a very volatile market. News in one part of the world can affect the value in a big way. It is not for everyone,” he said.
Soomaney, whose firm has many US-based clients, said he is currently helping the Federal Bureau of Investigation (FBI) in a case where an investor got scammed of a significant amount. He also has a client in India who sent €5,000 to a UK-based company that asked him to pay 5 per cent of his investment to cash out. “The company then stopped responding,” he said.
It’s time for regulation
The CAs who are already in the crypto space say it is about time that the Indian government drafts a regulatory framework on cryptocurrency trading.
“The Indian government has been playing hot and cold with crypto regulations. Unless someone is passionate about this industry, it’s tough to stomach the regulatory uncertainty,” Bhasin said.
“I think it’s a matter of time that the Indian government drafts an overarching regulatory framework. We are very passionate about this space and are happy to weather the turbulence,” he added.
Nagori said the decision to bring crypto transactions under the ambit of 30 per cent tax was a good start. “But a lot of clarity still needs to come in,” he said.
Accountants such as Soomaney say that perhaps those who have gotten an early headway into the industry can help design a regulatory framework.
“Bringing in regulatory clarity is now going to be in the hands of accountants like us who will help the government frame the system. No country has guidelines currently, so we do what we feel is right,” Soomaney said. “But, we as accountants have to figure out how to work this.”
Konale has a slightly nuanced view. He admits that there is lack of regulatory clarity, but he insists that it is of no concern to him.
“My objective is determination of gain. What is the gain that has been incurred by these investors? My role is to audit this like any other space,” he said. “And slowly, regulations will always come into place.”
(Edited by Ratan Priya)