The CEO of India’s domestic cryptocurrency exchange, WazirX, has suggested that the country’s crypto industry may need to wait for up to two years before seeing a more favorable tax regime. Last year, Indian authorities introduced a 1% Tax Deducted at Source (TDS) on cryptocurrency transactions, leading to a significant decline in trading volumes. This move prompted market makers and high-frequency investors to reduce their participation due to increased costs, resulting in a 97% drop in trading volumes at domestic exchanges in just 10 months.
Nischal Shetty, the CEO of WazirX, expressed doubts about an immediate reduction in the TDS, citing the absence of formal discussions between the cryptocurrency industry and lawmakers on this matter. Despite the uncertainty, Shetty remains hopeful that India will eventually adopt a more favorable crypto policy, although the specific measures are yet to be defined.
While India has called for a globally coordinated approach to cryptocurrency regulations, other countries such as Hong Kong, Dubai, and the European Union have surged ahead by establishing their own regulatory frameworks. These efforts aim to safeguard investors and provide clarity for digital asset companies, some of which are considering expansion beyond the United States due to increased regulatory scrutiny.
Cryptocurrency Regulations in India: The TDS Effect
The TDS has driven many Indian investors away from local crypto trading platforms in favor of overseas-based exchanges, resulting in Indian exchanges losing over 2 million users between February, when the tax was announced, and December of the same year. CoinDCX, a rival of WazirX, reported these numbers and stated that overseas platforms attracted more than 1.5 million customers from India during the same period.
Despite the government’s attempt to discourage crypto investment through the introduction of the TDS, crypto adoption in India has continued to grow. According to a Chainalysis report, India leads in adopting cryptocurrencies on various parameters, and the country’s crypto transaction volume is reportedly the second-highest in the world.