The crypto community in India is currently facing a tax levy that has crushed the trading of digital assets in the region. The tax levy has been considered counteracting, and proceeding to lower the rate has been appealed, according to CoinDCX. Before the implementation of the levy, CoinDCX was valued at $2 billion.
The crypto world is an ever-evolving landscape that has been met with continuous skepticism and uncertainty but has also grown in adoption. This has influenced government intervention based on tax levied and regulatory frameworks.
India repellents a significant percentage of global crypto trades. However, the region’s potential for crypto adoption has been hampered due to the heavy taxation that has deterred innovation and digital asset trading.
India’s crypto tax levy
India recently applied a 1% TDS tax regulation on crypto transactions. This was 16 months ago, but now the levy has influenced crypto trading in the region negatively. The major aim of this taxation strategy was to track the purchase and sale of crypto assets rather than raise the country’s revenue.
However, based on recent market analysis, data shows that the crypto trading volumes in India plummeted, and 95% of traders in the region drive to overseas platforms that are rather challenging for local officials to monitor.
This data was presented by CoinDCX’s Chief Executive Officer, Summit Gupta. Gupta commented on his expectations of the government to lower the tax in a timely fashion in order to mitigate the challenge.
Guitar was quoted in a recent interview and stated, “The whole purpose of the TDS was to track and trace transactions, but that is getting defeated.”
Moreover, the tax imposition influenced the market makers to exit Indian crypto exchanges due to the high transaction costs. This negatively affects their investments based on the sapped liquidity and terrorizing their trading investments.
Local platforms in the region remain stagnant even as Bitcoin shows a surge in its price, illuminating a rebound from the 2022 crypto winter. This has increased trading volumes in other international crypto exchanges, but the same can not be said for exchanges in India.
India’s approach to the implications of the tax imposed
India has now called for a global coordinated approach to digital asset rules with assistance from multilateral institutions. Gupta added in his interview that an expected change in regulatory clarity is expected by the end of 2025, after the nation’s General elections in 2024. However, no comments were made by the Finance Ministry spokesman in India.
Based on a recent decline in crypto trading volumes, CoinDCX recorded an undisclosed funding of $135 million at the end of last year’s first quarter. The funding round was led by Pantera Capital and Steadview Capital Management LLC. The CoinDCX firm was valued at $2.15 billion at the time, before the implementation of the 1% TDS tax in July 2022.
Currently, CoinDCX revenues are at one-third of the levels recorded prior to the tax levy. Gupta reported this and added that compliance expenses have increased following India’s anti-money laundering legislation application to the crypto industry.
This also led to the firm reducing its workforce and firing 12% of its staff in early 2023. The firm currently has an estimate of around 550 employees. Gupta also noted that the operating bank cash and revenue give CoinDCX a timed runway of five years.
Regardless of the imposed tax that has wilted local exchange currencies in India, data from Chainalysis shows the nation’s continued crypto adoption through other means, including offshore trading and blockchain-based financial services.
Chainalysis also recorded that India received digital assets valued at $250 billion since June and has only been preceded by the US figure of $1 trillion.
