India’s new crypto tax regime has finally come into effect and appears to be affecting trading volume in the country.
Media reports across the country suggest that trading volumes on crypto exchanges fell an average of 15% in the first three days of the month.
Not only that, but crypto exchanges operating in the country also saw their domain traffic drop by 40%.
India’s Crypto Exchange Trading Volume Suffers
Crypto India co-founder Aditya Singh confirmed this information on Twitter. It published charts showing a significant drop in trading volume of 4 of India’s major stock exchanges.
Indian exchanges saw their volume plummet after new crypto tax rules came into force on April 1. pic.twitter.com/ay60tR692q
— Aditya Singh (@CryptooAdy) April 2, 2022
Trading volume on WazirX, the country’s largest exchange, fell from $208 million to less than $100 million even before the start of the month.
The decline in trading volume comes as no surprise, given the heavy tax imposed on crypto. Indians will have to part with 30% of their profits with the new tax law.
In addition, another tax will come into effect next month, which will deduct 1% on each crypto transaction at source.
Already, crypto players are predicting that the 1% tax on every transaction will affect liquidity within the sector. They claim that this tax will limit the number of trades because investors who are high frequency traders will reduce their trades.
The rule also prevents tax deductions for losses incurred on trades, meaning investors would be more likely to suffer a loss.
Stakeholders denounce the new tax regime
Many predict that such a tax regime could drive many crypto traders and businesses out of the country.
According to Nischal Shetty, CEO of WazirX, the 1% withholding tax deduction (TDS) is “the worst case scenario for the industry”.
Executive Director of Policy at CoinDCX, Manhar Garegrat, also stated that “there will be no liquidity left in the markets” if TDS goes into effect.
“Trades placed by buyers will not be executed as efficiently as they are today, and such inefficiency will eventually reduce the entire ecosystem,” he added.
Major stock exchanges want to invest in India
As crypto players worry about an exodus, major exchanges like Coinbase and FTX are showing interest in investing in the Asian country’s crypto space.
Earlier today, Coinbase revealed that it plans to invest $1 million in crypto and Web3 projects initiated in the country.
Another one report revealed that FTX may be ready to invest in India’s Mobile Premier League (MPL), which intends to launch NFTs and earnings-based gaming before the end of the year.
This shows that despite all the government’s efforts to make the industry unattractive for investors, some stakeholders still believe that there are plenty of opportunities for them in the country.
