India’s new cryptocurrency tax has dealt a heavy blow to the country’s crypto exchanges, adding to broader sectoral woes and sending trading volumes plunging by up to 90 percent.
A 1 percent tax on Indian cryptocurrency trading since the start of this month has been a further disincentive for investors in the crypto market. Previously, burdensome regulations and a 30 percent digital income tax had squeezed volumes by 60-70 percent, now coupled with another tax rule.
“We are scraping the bottom of the barrel as far as volume is concerned,” said vice president of crypto exchange WazirX, Rajagopal Menon.
“The amount of regulatory clutter, the lack of ease of doing business and the paperwork that has been created on every trade has made investors and traders wary and we are seeing people moving to international exchanges or to the gray market,” he added.
Lower trading volume has dragged down earnings for the Indian bourse, which has curtailed marketing and hiring while formulating strategies to cope with the protracted decline.
The founder of digital bank Cashaa, Kumar Gaurav said several crypto companies in India were laying off people after hiring large numbers last year and now have to look at operating and other company cost-cutting measures.
While Indian exchanges took a hit, trading volumes globally rose higher as cryptocurrency prices fell. The top global crypto exchanges were trading a maximum daily volume of USD 137 billion when the price of bitcoin fell sharply on May 11, 2022.
India’s 30-percent Crypto Tax Disappoints Investors
Previously, although the crypto industry in India had started its upswing over the past month or so, but crypto investors in India didn’t seem to have much to be proud of.
Finance Minister Nirmala Sitharaman recently made a major announcement regarding the crypto industry in India. In accordance with the newly revised rules and taking effect from April 1, any income i.e., profits generated from the transfer of virtual digital assets (VDA) within the country’s borders will be taxed at a rate of 30 percent.
It’s easy like this, let’s say an Indian citizen buys bitcoin for USD 40,000 (Rp 574.3 million) per coin and then sells it for USD 60,000 (Rp 861.5 million) not long after.
The individual will be responsible for paying a flat tax of 30 percent of the $20,000 profit he/she realizes as part of the transaction.
Crypto Investors react badly
As a result of this, crypto investors in India responded or reacted badly to the newly established rules. As soon as news of the government’s new tax imposition was published, a number of prominent cryptocurrency figures took to Twitter to express their displeasure.
Co-founder of India’s popular crypto YouTube channel, Aditya Singh, said India should become the center of the crypto world rather than suppress it.
“India should aim to become the crypto hub of the world, rather than suppress the industry with heavy taxes. This will create so many jobs and income for the government,” wrote SIngh on Twitter, quoted from FX Empire, Wednesday (13/4/2022).
Similarly, the co-founder of India’s largest cryptocurrency exchange WazirX, Nischal Shetty, noted such a law would hinder India’s position as a leader in the global crypto landscape.
In his view, the best way to “reduce this tax” is to help India’s digital asset industry grow to an even greater rate than it is today.