- Local investors shouldn’t move to foreign crypto exchanges to skirt local taxes, WazirX’s CEO said
- Companies dependent on transaction fees could revise revenue forecasts, a crypto exec told Blockworks
Trading volumes on Indian crypto exchanges plummeted after a contentious tax policy came into effect on Friday.
CoinDCX saw the biggest nosedive, with volumes down from roughly $6 million on June 28 to just about $2 million on Tuesday — a 70% drop. WazirX’s trading volumes fell by a similar level, while BitBNS and ZebPay had relatively smaller decreases.
The fall in volumes cannot entirely be attributed to India’s crypto tax laws taking effect. A combination of falling cryptoasset prices, liquidations and financial struggles of key crypto players, soaring inflation and the anticipation of a recession have all resulted in the current “crypto winter.”
Even so, crypto executives in India had warned the central authority’s decision to impose a 1% tax deducted at source (TDS), above a flat 30% tax on crypto profits, would discourage investors from trading in digital assets.
Nischal Shetty, CEO of WazirX, said on Twitter that investors in India shouldn’t be flocking to foreign crypto exchanges as a way to sidestep local tax laws. “There has been misinformation spread by some that trading on foreign exchange does not attract TDS. That is incorrect,” he said.
Further, investors shouldn’t expect the 1% TDS to be altered this year, according to Khaleelulla Baig, co-founder of Singapore-based KoinBasket.
“It’s important that the government should soon look at revising the guidelines to encourage entrepreneurship in the Web3 sphere,” he said in an email.
Before the 1% TDS kicked, CoinSwitch CEO Ashish Singhal told Blockworks cryptocurrencies should be taxed at par with equity markets.
“The crypto market is driven by high-frequency traders, like intraday traders in equity markets. These traders operate on extremely thin margins, and locking up their capital with high TDS will restrict their ability to operate,” he said.
Sinking trading volumes could have a direct impact on the revenue streams of these companies, possibly prompting them to lay off workers in an industry already grappling with high employee turnover.
“Transaction volume in the crypto space has collapsed,” Manuel Ortiz-Olave, co-founder of equity tokens business Brickken, told Blockworks via Telegram. “This implies that companies dependent on transaction fees (i.e. exchanges and similar) will see a major revision of revenue forecasts, which will drive cost restructuring decisions.”
Companies building on top of blockchain technology-providing services, that aren’t intrinsically linked to the performance of cryptocurrencies, will do better in comparison, he added.