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Indian crypto trading volumes fall as new tax rules come into effect
Local investors should not move to foreign crypto exchanges to avoid local taxes, WazirX CEO says Companies dependent on transaction fees may revise their revenue forecasts, a crypto executive told Blockworks Trading volumes on Indian crypto exchanges plummeted after a controversial tax policy came into force on Friday. Top exchanges including WazirX, ZebPay, CoinDCX and BitBNS saw volumes fall between 10% and up to 70% in the last week, according to data from CoinGecko. CoinDCX saw the biggest nosedive, with volume dropping from about $6 million on June 28 to just under $2 million on Tuesday – …
Indian crypto trading volumes fall as new tax rules come into effect
- Lokale Investoren sollten nicht zu ausländischen Krypto-Börsen wechseln, um lokale Steuern zu umgehen, sagte der CEO von WazirX
- Unternehmen, die von Transaktionsgebühren abhängig sind, könnten ihre Umsatzprognosen revidieren, sagte ein Krypto-Manager gegenüber Blockworks
Trading volumes on Indian crypto exchanges plummeted after a controversial tax policy came into force on Friday.
Top exchanges including WazirX, ZebPay, CoinDCX and BitBNS According to data from CoinGecko, volumes fell between 10% and up to 70% in the last week.
CoinDCX saw the biggest nosedive, with volume dropping from about $6 million on June 28 to just under $2 million on Tuesday - a 70% drop. WazirX's trading volume fell by a similar level, while BitBNS and ZebPay recorded relatively smaller declines.
Indian crypto exchange trading volume has plunged by 90-95%, 3 months after new crypto laws came into effect.
Based on current volumes – exchanges are only able to generate trading fee income of a maximum of $1000 to $3000.
Bitbns still seems to be doing well.
Hard times lie ahead. pic.twitter.com/KNDbea9BCn
— Crypto India
(@CryptooIndia) July 4, 2022
The drop in volume cannot be entirely attributed to the entry into force of India’s crypto tax laws. A combination of falling crypto asset prices, liquidations and financial struggles by major crypto players, rising inflation and expectations of a recession have all led to the current “crypto winter”.
Despite this, crypto executives in India had warned that the central agency's decision to impose a 1% withholding tax (TDS) over a flat 30% tax on crypto profits would discourage investors from trading digital assets.
Nischal Shetty, CEO of WazirX further said Twitter that investors in India should not flock to foreign crypto exchanges to avoid local tax laws. "Some have spread misinformation that foreign exchange trading does not attract TDS. This is false," he said.
1/Something important for Indian crypto traders to understand
• Trading on foreign exchanges that do not deduct TDS would mean YOU have to pay TDS directly to the Income Tax Department
• You need to know the PAN of the seller on international exchanges
• May be asked to pay 20%…
— Nishal (Shardeum)
(@NischalShetty) July 4, 2022
Investors should also not expect the 1% TDS to change this year, according to Khaleelulla Baig, co-founder of Singapore-based KoinBasket.
“It is important that the government soon considers revising policies to promote entrepreneurship in the Web3 space,” he said in an email.
Before the 1% TDS came into effect, CoinSwitch CEO Ashish Singhal said that Blockworks cryptocurrencies should be taxed on par with stock markets.
"The crypto market is driven by high-frequency traders, like intraday traders in the stock markets. These traders operate on extremely low margins and tying up their capital at high TDS will limit their ability to operate," he said.
Falling trading volumes could directly impact these companies' revenue streams, potentially prompting them to lay off employees in an industry already struggling with high employee turnover.
“Transaction volumes in the crypto space have plummeted,” Manuel Ortiz-Olave, co-founder of equity token company Brickken, told Blockworks via Telegram. “This means that companies that rely on transaction fees (i.e. exchanges and the like) will see a major revision to their revenue forecasts, leading to cost restructuring decisions.”
Companies built on blockchain technology and offering services not necessarily tied to the performance of cryptocurrencies will fare better in comparison, he added.
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The post “Indian Crypto Trading Volume Falls as New Tax Rules Come Into Effect” is not financial advice.