Binance has recorded increased users on its platform in India after the government imposed new tax levies on cryptocurrency transactions.
Binance Sees a Massive Increase in Users
The world’s largest crypto exchange has experienced a surge in new user entries. This comes after the government introduced a 1% tax deducted at source (TDS) in July, as per Bloomberg.
Moreover, the Bloomberg report shows that app downloads shot up by 429,000 in August. This is the highest recorded figure for India in 2022.
However, not all crypto exchanges saw such a huge increase. The daily trading volume at some of India’s crypto exchanges has been down by more than 90% since the tax increment went into effect.
However, some industry players complained that the new levy was not clear enough for some firms.
Regarding the increase, Rohan Misra, founder of SEBA India, noted that the new guidelines are not explicitly clear. The regulations did not specify if the 1% TDA extends to crypto derivatives trading and not just spot transactions.
Furthermore, the 1% TDA is paid on the back of a new 30% tax on profits from crypto tokens. Similarly, traders cannot offset their losses against their income in crypto trading.
It is not just Indian-based virtual asset services providers facing a dwindling market. The U.S.-based FTX experienced a surge in app downloads at the start of the year. From 40,000 in January to 96,000 in July to 52,000 in August, the firm has seen a drop in user base.
Coinbase Global Inc. saw its 31,000 app downloads in June drop to 16,000 in August.
Moreover, the Indian-based Wazirx app download fell to 92,000 in August from a massive 596,000 at the start of the year.
New Tax, New Problems
The introduction of the 1% TDS hurts crypto activities in India. More importantly, the government’s decision to impose levies led to a loss of momentum for the crypto space.
Furthermore, as the country’s first crypto law, investors and traders are confused about what it intends to achieve. They envisioned friendly guidelines, not an immediate 30% tax on unrealized gains.
The new policy has driven some crypto exchanges to the brink. Transactions in virtual assets have been at their lowest in India recently. Reports indicate that investors are already eyeing off-shore exchanges to cut their losses on the high tax.
Local virtual asset services providers are heavily affected by the authority’s move. The belief is that taxation cannot deter crypto investors. However, the 1% tax is akin to a capital lock-in to prevent investors from moving their funds.
This implies that the TDS is not the issue but the amount slammed by the government. The tax rate limits the number of trades a user can do with a given capital.
Investors hope for more crypto-friendly regulations as they lock up their current holdings.
Many welcomed the new regulations, but the tax levies were the only issue. Indian authorities must consider bringing back the crypto market to its previous peaks.
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