The implications of what anti-cryptocurrency regulations can do to a prosperous economy can be seen firsthand in India. A report by WazirX, supporting the sharp decline in trading volumes across all local crypto exchanges, reveals a change in investor stance in light of the Indian government’s second crypto law: a tax deduction. at source (TDS) of 1% on each cryptocurrency transaction.
Trading volumes on Indian exchanges have seen a 90-95% reduction since the country introduced a law that would tax investors 30% on unrealized profits. With two consecutive taxes set to gobble up their holdings, most Indian investors appear to have opted for hibernation amid a ruthless bear market.
Indian Crypto exchange’s trading volume have plunged by 90-95% , 3 months after new crypto laws became applicable.
Based on current volumes – Exchanges are only able to generate trading fee revenue of $1000 to $3000 Max.
Bitbns seems to be still doing well.
Tough times ahead. pic.twitter.com/KNDbea9BCn
— Crypto India (@CryptooIndia) July 4, 2022
WazirX and Zebpay, two of the largest Indian exchanges, surveyed some 9,500 active users in the region to better understand investor sentiment. Unsurprisingly, the survey revealed that 83% of users were forced to reduce how often they trade due to TDS deductions.
WazirX & @zebpay recently conducted a Trader Sentiment Survey which revealed that 83% of traders are of the opinion that recent tax implementation has determined their trading frequency.
More on the survey https://t.co/Zim75TqslP
— WazirX: India Ka Bitcoin Exchange (@WazirXIndia) July 6, 2022
Another method used by Indian investors to avoid paying the TDS was to sell their holdings before the tax came into force. More than 27% of investors, mostly millennials, ended up selling 50% of their portfolio before April 1, while 57% sold less than 10%. In this regard, Rajagopal Menon, Vice President of WazirX, stated:
“The results of the survey stipulate the need to reform certain conditions to help the growth of cryptocurrency investors in the country, which will translate into economic prosperity. It is necessary to balance the fiscal regime to encourage participation and reactivate trade volumes.”
Indian investors turning to international exchanges to avoid taxes carries with it the risks associated with trading on exchanges that do not comply with know-your-identity regulations and have little or no oversight. ZebPay CEO Avinash Shekhar added:
“While India’s crypto tax policy is a step forward, reconsidering certain aspects will help build a more favorable regulatory environment for all industry players and ultimately contribute to overall economic progress.”
GARI, a token launched by Bollywood celebrity Salman Khan, crashed 83% in a matter of hours on Monday. While GARI Network dismissed the price decline as a “market event”, investors suspected it was a rug pull.
Of the batch, nearly 2,300 or 24% of the investors surveyed shared their interest in testing international cryptocurrency exchanges to avoid paying TDS during trading cycles, while 29% confirmed to have drastically reduced their trading activities.
GARI Network conducted an internal evaluation and found no obvious hacks that could bring down token prices. The company stated:
“So far this looks like a market event. We assure our community that ALL tokens are safe in the respective reserves.”
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