India may not see a relaxation of its crypto tax rules for at least another two years, according to a prominent digital asset exchange within the country.
In the previous year, Indian authorities introduced a 1% tax called TDS on crypto transactions. This move led to a sharp decline in trading volumes on crypto exchanges, with market makers and high-frequency investors withdrawing due to increased costs. One of WazirX’s primary competitors even attributed a 97% drop in trading volumes at domestic exchanges to this tax, all within a mere 10 months.
In an interview, Nischal Shetty, the CEO of WazirX exchange, stated, “I don’t anticipate an immediate reduction in TDS since there have been no formal discussions between the industry and lawmakers specifically about it.”
India has advocated for a globally coordinated approach to cryptocurrency regulations, seeking support from institutions like the International Monetary Fund. Meanwhile, other regions such as Hong Kong, Dubai, and the European Union have surged ahead by implementing their regulatory frameworks to safeguard investors and provide clarity for digital asset companies, some of which are eyeing expansion beyond the United States following regulatory crackdowns there.
Shetty expressed hope that India would take some steps toward a more favorable crypto policy, although he did not specify what those measures might be. The Finance Ministry did not respond to inquiries from Bloomberg News.
Primarily due to the TDS, Indian investors have abandoned local crypto trading platforms in favor of overseas alternatives. According to a report from CoinDCX, a local rival of WazirX, Indian exchanges lost over 2 million users between February (when the tax was announced) and December of the previous year. During this period, overseas platforms attracted more than 1.5 million Indian customers, as estimated by CoinDCX.
Sumit Gupta, CEO of CoinDCX, mentioned that the company is actively lobbying the Indian government to reduce the TDS from 1% to 0.01%, although no specific timeline for such a reduction has been provided.
Some entrepreneurs in the crypto space are not waiting around for regulatory changes. Shetty, for instance, has relocated to Dubai to launch his next venture, Shardeum, a blockchain aiming to compete with Ethereum and other major networks. CoinDCX is also expanding its horizons, recently leading a funding round for BitOasis, a crypto exchange focused on the Middle East and North Africa.
In 2022, WazirX downsized its workforce, and in August of the current year, both CoinSwitch and CoinDCX announced job cuts.
Despite the challenges, India’s traditional role as a hub for software and information technology engineering continues to attract certain digital asset firms. For instance, San Francisco-based Coinbase Global Inc. halted new user sign-ups for its Indian exchange in June but stated this month that it maintains “a robust tech hub” in the country, employing “a few hundred people,” making it one of the firm’s largest international presences.
Gemini, another US-based platform, announced in April its plans to establish an engineering hub in India.
Furthermore, the Reserve Bank of India is progressing with its digital rupee initiative. In July, Reserve Bank of India Deputy Governor T. Rabi Sankar reported that approximately 1.3 million customers and 300,000 merchants are already using the digital currency.