According to data compiled by Crebaco, a cryptocurrency research firm, crypto trading volumes on India’s major exchanges have plummeted since April 1, the day a new tax on crypto profits went into effect.
Data from CoinMarketCap and Nomics, a data firm, were used to compile the volumes of four Indian exchanges. The data shows a 72 percent drop in WazirX, a 59 percent drop in ZebPay, a 52 percent drop in CoinDCX, and a 41 percent drop in BitBns. Trading volumes were calculated in US dollars.
India now taxes profits from cryptocurrency transactions at a rate of 30%, with no provision for offsetting gains with losses from other crypto transactions. The most contentious provision, the 1% tax deducted at source (TDS) liability, will not go into effect until July 1.
It is unclear whether the drop in trading volumes is due to the new tax law, as the drop on Indian exchanges is largely consistent with a global trend.
April 1st, 2nd, and 3rd were all holidays. Volumes have continued to fall since then. I don’t believe this will happen again, Crebaco CEO Sidharth Sogani said.
This has set a new standard. It may continue to fall or move sideways, but it is unlikely to rise again. The new tax has harmed the market. The government must investigate this, and because there is no way to stop it (crypto), the government must embrace the technology, he said.
According to senior cryptocurrency lawyer Suril Desai, it is unclear whether the drop in volumes indicates that trading has shifted elsewhere. The only trading volumes we receive are from exchanges. Off-chain trades may be taking place for which there is no record, Desai explained.
ZebPay declined to comment, and the other exchanges did not respond to requests for comment right away.
According to Sathvik Vishwanath, co-founder, and CEO of Unocoin, another Indian exchange, the new tax law is having an impact on the market.
People earning less than 1,000,000 (Indian rupees) per year are subject to a 30% fixed income tax on cryptocurrency. TDS of 1% has an impact on market makers and liquidity providers. Both are required for a more robust crypto ecosystem in India, Vishwanath tweeted. One million Indian rupees is roughly USD 13,000.
According to Anton Gulin, regional director of the AAX crypto exchange, the drop in volume should be temporary.
The AAX exchange has also seen an outflow of active Indian users in recent weeks. However, I believe that the tax rate should be reduced for attracting more taxpayers, as this is the ultimate goal of any government Gulin stated.
According to Johnny Lyu, CEO of KuCoin, another trading platform, some beginners are less willing to invest in cryptocurrency in the short term.
However, according to internal data, there has been no outflow of KuCoin. This can be explained by our users’ higher level of crypto nativeness, he stated. The new law will have an immediate impact on market mood and behavior, but it will be difficult to prevent cryptocurrency adoption in the long run.
