Trading volume on the Indian crypto market fell by 63% overnight
The decline in trading volumes on the Indian crypto market continues. The industry suffers from the taxes that the government consistently introduces, hesitating to ban the use of digital assets altogether.
On July 1, India introduced another tax on cryptocurrency transactions. It provides a deduction from the source of 1% from sales and transfers of digital assets worth more than 10,000 rupees, equivalent to $126.
According to government officials, the tax will help control transactions as part of the fight against terrorist financing and money laundering. However, local exchanges are convinced that the main purpose of the new levy is a mass exodus of traders, which can destroy the entire trading structure.
The market response was immediate
Friday was marked by the entry into force of the new tax and a sharp collapse of the Indian crypto market in response to it. Trading volume on one of the leading exchanges, WazirX, fell from $14.22 million (June 30) to $5.33 million (July 1), according to analytical firm Nomics.
Over the weekend, the numbers dropped to a record low, falling to $2.7 million. With the beginning of a new week, the exchange is gradually restoring the trading volumes, but they are still critically low compared with the usual figures.
Source: Nomics
The CoinDCX platform reacted similarly. The trading volume was $2.5 mln on June 30, but then on July 1, it fell to $2.04 mln and continued to plummet until Sunday. After reaching a critical value of $829 thousand, trading volumes began to show a positive trend but have not yet fully recovered.
Source: Nomics
Is the Indian government targeting the crypto industry?
Representatives of exchanges are convinced that a 0.1% tax is enough to control transactions. At the same time, they emphasize that the previously introduced fixed 30% tax on all income from virtual currency has become an absolute disaster for many traders.
Data from research organization Crebaco show that Indian crypto-trading volumes have fallen by almost 70% since April 1. An additional blow for holders of digital assets was the ban on compensating losses from one cryptocurrency with profits from another.
Under current legislation, traders still have the option to demand tax refunds from sources when filing an annual tax return. However, in that case, refunds are only available after the end of the current fiscal year.
Regulations are good for the crypto industry and a definite positive step. However, 30% taxation and 1% TDS is unfair.said Sumit Gupta, one of the co-founders of the CoinDCX exchange.
Against the backdrop of tax innovations, industry representatives expect another round of crypto market decline soon. Rajagopal Menon, vice president of Zanmai Labs Private Limited, which operates WazirX, said,
There may be another dip (after July 1) as traders see their capital getting locked.
Despite such pessimistic predictions, there are still experts who remain optimistic about the future of cryptocurrencies in India. Among them is Ashish Singhal, co-founder and CEO of CoinSwitch exchange. He believes cryptocurrencies can become the flagship of the technological shift in a country with talent, startup culture, and the necessary digital infrastructure.
