There are fears that India may use its position as president of the G-20 in its fight against the cryptocurrency industry.
World’s largest democracy, India, has maintained its crypto tax rules in its latest budget. Last April, the Indian government announced a 30% tax on crypto gains. It also imposed a 1% tax deducted at source (TDS) on all crypto-asset transactions.
It didn’t take long before the law set the crypto industry back. There were expectations that the government may announce tax cuts during the 2023 budget announcement. However, nothing like that happened when Finance Minister Nirmala Sitharaman presented the nation’s budget. Sitharaman did not mention crypto, virtual digital assets, blockchain, or central bank digital currencies (digital rupee) in his presentation.
Crypto Tax Rule Killing Indian Crypto Industry
According to a report by Indian think-tank Esya, up to $3.8 billion of crypto trading volume was transferred from domestic exchanges to foreign exchanges between February and October 2022. Contrarily, local exchanges like CoinSwitch, CoinDCX, and WazirX lost 81% of their trading volume in four months between July and October.
While the tax on crypto gains is equal to that charged on online casinos, many believe that the TDS is the real killer. Crypto analyst, Ajeet Khurana, believes that the law effectively compelled people to trade on foreign exchanges who won’t implement TDS.
It’s not just transactions that have been affected. App downloads and keyword search volumes have also dropped, indicating a declining interest in the crypto industry by Indians. Despite the setbacks, The Bharat Web3 association representing the Indian crypto industry believes that all hope is not lost. The association believes reviewing the TDS to 0.01% or a maximum of 0.1% can reverse the trend.
Will India Use G20 Power Against Crypto?
For now, there are fears that India may use its position as president of the G20 in its fight against the cryptocurrency industry. Already, the Finance minister has noted that crypto asset regulation is a priority for the Indian president. However, going by the nation’s body language, nothing positive may come out of the deliberation.
For example, the nation’s central bank has constantly advocated for a ban on cryptocurrencies. Also, the parliament has accused the crypto industry of not doing enough to minimize risks associated with the industry.
Whatever the case, the Indian crypto industry must brace up for whatever may come.