By
Steve Muchoki
May 23rd, 2023
Crypto trading volumes on several crypto exchanges in India plummeted as much as 72%, possibly tied to a new 30% profit tax law.
Crypto trading volumes in India have plummeted since April 1st following the institutionalization of a new tax law. According to data collated by some crypto research organizations, the trading volumes of some Indian crypto organizations showed varying degrees of shortfalls.
Effect of Waning Crypto Volumes in India
For instance, WazirX saw a 72% drop, while ZebPay incurred a 59% decline in crypto trading volume. In addition, there was a 52% trading setback on CoinDCX with a 41% reduction on BitBns.
Sidharth Sogani of Crebaco, a crypto research organization, said that the information came from reliable sources. According to Sogani, after analyzing up to five crypto exchanges “April 1, 2, and 3 were holidays. Since then, volumes are continuing to fall. I don’t think this will return. This has created a new benchmark. It can go further down or sideways but it is unlikely to go back up. It is clear that the new tax has impacted the market negatively.”
Furthermore, Sogani also suggested more proactiveness on the part of the Indian government. According to the Crebaco founder and chief executive officer, “the government must look into this and because there is no way to stop this (crypto), the government should embrace the technology.”
However, some stakeholders believe that the current low trading volume does not reflect the real tax law impact. According to them, the next 1-2 more weeks will unravel what actually obtains. Meanwhile, data suggests that the decline in trading volumes on Indian exchanges is part of a broader global trend.
Suril Desai, a senior crypto lawyer, also opined on the reduced trading volume situation. According to Desai, this could mean a reduction or a total redirection of trading elsewhere. In the crypto lawyer’s words:
“The only trading volumes we get comes from exchanges. The off-chain trades could be happening for which there is no record.”
Insight into the New Tax Law
At the beginning of the year, the Indian government announced tax rates of 30% on profits for virtual digital assets (VDA) transactions. This announcement appeared to be a way of recognizing the crypto space as its own formally-recognized and legal entity. However, it was not until the new tax rules came into full force at the beginning of April that the brunt became apparent.
The new tax law in India does not allow crypto holders to offset their losses. In addition, the law has a controversial 1% TDS (tax deducted at source) provision expected to severely affect retail investors with low trade margins. The TDS provision will take effect from July 1st.
Following a dip at the turn of the year in January and February, the global crypto market began to experience a recovery in March. According to WazirX founder, Nischal Shetty, there was a 20-30% uptick in March volumes compared to February.
