Since the new crypto tax came into effect on April 1, Indian digital asset exchanges have witnessed a sharp fall in transaction volumes. The final days of March also saw a panic selling.
Crypto Transactions Plummet in India
Sharing volume graphs of four leading crypto exchanges, CoinDCX, BITBNS, ZEBPay, and WazirX, on April 3, a crypto industry insider tweeted, “Indian Exchanges saw Volume drop after New Crypto tax rules became applicable on April 1.”
A news report attributing the data to crypto research and rating firm CREBACO Global said the transaction volume and domain traffic at major Indian cryptocurrency exchanges dropped by up to 55% and 40%, respectively.
“We observed a drop in volumes by up to 55 per cent compared to the volumes in March end, and also a drop of over 40 percent in domain traffic on Indian exchanges,” Sidharth Sogani, CEO, CREBACO Global, was quoted as saying by another media report.
WazirX saw its domain traffic decline from over 70 million to 40 million, CoinDCX from 19 million to 12 million, ZebPay from 15 million to 4.4 million, and Bitbns from 11 million to 9.9 million, the media coverage said.
Over the past weeks, local media has been voicing concerns that the new crypto taxes may drive small investors away from centralized exchanges to decentralized exchanges, terming the latter as a grey market.
Crypto Taxation Amid Regulatory Vacuum
Introduced through Budget 2022-23, the Indian government levied a 30% tax on profits and 1% TDS on all cryptocurrency transactions. What makes these taxes all the more painful for investors is that losses on one asset can’t be offset against profit on another coin. Experts feel these provisions will make the Indian crypto market uncompetitive, and the country may lose the edge that it might have otherwise.
These tax provisions have become effective from April 1, the beginning of the new financial year 2022-23.
They were presented as part of the Annual Budget in the Indian parliament in early February this year and generated a considerable amount of debate, with some lawmakers calling for a more favorable environment for the crypto industry while others demanding an even more stringent tax regime.
What makes crypto taxes fearsome is the lack of regulation that makes dealing in digital assets doubly risky. The Indian government says it wants to wait for a global consensus to emerge on regulation issues before it comes up with its own.