Heavy Tax Levy Reduces Crypto Trading Volume In India
In a recent report’s data, crypto trading volumes have drastically reduced in India as the data showed that 95% of traders had shifted their trading activities towards offshore platforms after the government of the country implemented a strict tax law on crypto investors. Nonetheless, records show that despite the stringent crypto laws, the crypto adoption rate keeps increasing in the region as users focus on other blockchain-based activities apart from trading.
According to the report, the heavy tax levy the Indian government imposed on the crypto community has incited a significant drawdown on digital assets trading in the region. Furthermore, spectators considered the heavy taxation alongside other strict laws as countermeasures that the government aimed at taming the rapidly evolving crypto industry, which is widely believed to have revolutionized the financial world.
Consequently, the heavy tax laws are hindering the continuous growth of crypto and blockchain technology as many crypto traders and investors are reportedly shifting their focus from Indian platforms to foreign platforms for their digital assets trading exercise.
TDS Tax Law Decreased Indian Crypto Trading Volume
About 16 months ago, the Indian authority drafted and enforced a series of regulations to control the conduct in the crypto industry. One of the laws imposed a 1% TDS tax on every crypto transaction conducted on local exchanges. Also, the authority claimed that the tax law was targeted at tracking the sale and purchases of digital assets rather than increasing the country’s revenue.
However, the heavy tax levy has resulted in a significant decline in crypto trading volume in the region. For instance, statistics showed that about 95% of crypto traders in the country have started conducting their trading activities on foreign platforms to avoid encounters with the local authorities.
According to Summit Gupta, the Chief Executive Officer of CoinDCX, it is highly expected that the government should decrease the tax rate to rectify the current trading volume challenge. In addition, the CEO stated in a recent interview that the primary function of the 1% TDS tax was to trace crypto-related transactions; however, the current situation is derailing from the original purpose.
Local Exchanges Saw Red With Heavy Tax
Furthermore, reports showed that enforcing the tax laws had driven market makers out of the local crypto exchanges in the country as transaction costs skyrocketed. The high cost negatively impacted their investments as the sapped liquidity terrorized their trading assets.
Recently, the report showed that little or no activity is going on on local crypto exchanges in the region, even when Bitcoin recently recorded a more than 38% surge in price, leading to a significant increase in trading volume in other international exchanges, except India.
Meanwhile, with aid from multilateral institutions, the Indian authority has called for a unified global regulatory framework to regulate the crypto industry. In his interview, Gupta stated that after the Indian general election in 2024, a change in crypto regulation would occur before the end of 2025. Nonetheless, the Indian Finance Ministry spokesperson did not comment on the assertion.
CoinDCX Recorded Decline In Trading Volume
According to reports, CoinDCX, a prominent crypto exchange in India, was valued at a whopping $2.15 billion in net worth and recorded about $135 million in revenue from a fund rally executed around 1st quarter of 2022, prior to the introduction of the 1% TDS. However, Gupta reported that the firm now recorded one-third of 5he previous year’s revenue due to the heavy tax levy imposed on traders.
In addition, Gupta stated that following the AML laws that the Indian authority imposed on the crypto industry, the cost of compliance has skyrocketed, negatively affecting crypto exchanges. Consequently, many local crypto platforms were forced to reduce their workforce to remain operational. For instance, Gupta stated that CoinDCX laid off about 12% of its workforce.
Regardless of the strict crypto laws enforced in India, statistics showed that the creation of crypto adoption in India continues to increase. This is because many traders are now using offshore crypto exchanges to continue their trading activities while they are boycotting the stringent laws of the nation.
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