According to Nischal Shetty, Chief Executive Officer of the WazirX exchange, a shift in India to a less onerous crypto tax regime may be two years away.
Last year, Indian officials imposed a 1% levy (TDS) on crypto transactions which caused trading volumes at exchanges to crash as market makers and high-frequency investors pulled back due to higher costs. One of WazirX’s main competitors reported that the tax contributed to a 97% collapse in volumes at domestic exchanges in just 10 months.
India has called for a globally coordinated approach to crypto rules with the help of institutions such as the International Monetary Fund. However, other countries such as Hong Kong, Dubai and the European Union have pulled ahead by rolling out their own frameworks.
In response to the TDS, investors in India have abandoned local crypto trading platforms for overseas-based ones. CoinDCX reported that Indian exchanges lost over 2 million users between February and December last year, and overseas platforms gained more than 1.5 million customers from India during that time.
To counteract the effects of the TDS, CoinDCX is lobbying India’s government to reduce it from 1% to 0.01%. Meanwhile, some crypto entrepreneurs are not waiting for the outcome of the lobbying and have moved abroad to build their next ventures.
Consequently, WazirX slashed its workforce in 2022 while CoinDCX and CoinSwitch announced job cuts in August this year. Despite this, India still remains a hub for software and information technology engineering, as evidenced by Coinbase Global Inc. and Gemini setting up engineering hubs in the country. Furthermore, the Reserve Bank of India is pushing ahead with a digital rupee with 1.3 million customers and 300,000 merchants already using it.
