India’s Crypto Exchanges In Trouble? 1% Tax Keeps Traders Away
India’s Crypto Exchanges In Trouble? 1% Tax Keeps Traders Away
After the government implemented a long-feared 1 percent tax on all transactions, this week saw a sharp decline in the amount of cryptocurrency trading in India.
Following the planned tax's implementation on July 1st, trading volumes on the main exchanges of the nation saw a sharp drop of more than 50 percent in the past few days.
The action underscores the latest effort by the Indian government to prevent the trading of cryptocurrencies. The Reserve Bank and Finance Minister Nirmala Sitharaman have both publicly condemned the market, labeling it as speculative and lacking in substance.
A few months ago, India enacted a 30 percent tax on any earnings made through cryptocurrency. Now, there is a 1 percent tax on all transactions. The facility, which is currently subject to the highest tax rate in the nation, may be subject to even higher levies, according to reports.
India crypto volumes fall off a cliff
Data from sources reveals that since July 1, trade volumes at WazirX and CoinDCX, two of India's major cryptocurrency exchanges, have fallen by more than 75%.
The daily volumes for WazirX plunged to $1.9 million on Saturday from 7.2 million on Monday. Volumes for CoinDCX fell to $4.2 million from $14.6 million. At its peak in 2021, the two witnessed daily volumes totaling more than $200 million.
The investment was already discouraged by the 30 percent capital gains tax; nevertheless, the new 1 percent tax is expected to significantly reduce volumes. India is also thinking about imposing a 28 percent sales and goods tax on cryptocurrency.
As the government develops an appropriate regulatory framework for cryptocurrencies, the steps are expected to keep crypto volumes low in the nation. India was one of the nations with the quickest adoption rates in the sector as of 2021, with a rapidly expanding community of cryptocurrency users.
Global exchanges also see volumes decline
Volumes in India have also fallen due to a global reduction in cryptocurrency trading activity and a collapse in pricing.
Larger companies like Binance, Coinbase, and FTX have all experienced a steady fall in volume during June. This occurred when traders exercised caution as the market capitalization of cryptocurrencies fell below $1 trillion.
The meltdown has been fueled by a combination of increasing prices, interest rates, and recessionary worries, echoing losses across the majority of risky assets.
However , Indian officials are already looking at the cryptocurrency meltdown. Shaktikanta Das, governor of the Reserve Bank, issued a warning about increased volatility in the market, calling it an "obvious threat."
