Tax, regulatory uncertainties may affect India’s crypto ratings

NEW DELHI : Cryptocurrency adoption in India is expected to decline rapidly in the second half of this year, as new tax rules drive many people away from the industry. The imposition of a 30% capital gains tax on crypto investments in India in April, followed by a 1% tax withheld at source (TDS) on crypto gains in April. July, has increased regulatory uncertainty and will affect India’s position as a leading market for cryptocurrencies in Asia.

According to the Crypto Geography 2022 report by crypto market analytics firm Chainalysis, India is the top value crypto market in Central, South Asia and Oceania (CSAO) region. . From last July to June this year, India’s crypto investment market was valued at $172 billion – significantly higher than second place Thailand, which attracted less than 150 billion dollars. dollars. However, since the announcement of Budget 2022, the heavy taxation of crypto investments in India, coupled with a lack of clarity on how such investments will be managed, has caused the Exchanges are affected.

Data from crypto market tracker Crebaco Global from April this year to September 14 shows a clear drop in daily trading volume on WazirX and CoinDCX — two of the exchanges. India’s largest cryptocurrency. On WazirX, daily trading averaged at $23.2 million in April – a figure that has now dropped to $1.3 million this month, marking a drop of more than 94%.

On CoinDCX, too, daily trading dropped from $13.1 million in May to $1.4 million on September 14.

WazirX saw its quarterly transaction average drop 86% sequentially to $6.9 million in the September quarter from $48.9 million in the June quarter. CoinDCX’s quarterly trading has fallen to $6.3 million this quarter – down 79% from $29.8 million in the June quarter. While the September quarter is still incomplete, the average transactions The daily average on these exchanges does not show any significant growth.

Currently, the downturn in the market reflects a domino effect, added by a number of factors, said Vikram Subburaj, chief executive officer of homegrown crypto exchange Giottus.

“The implementation of TDS, which came into effect on July 1, has had a major impact on liquidity in Indian crypto exchanges. The addition of this tax on cryptocurrency margins means that investors are wary of making trades — as the latter no longer yields them profits. This has had a huge impact on trading volumes on exchanges, and the prevailing global economic conditions have done nothing to support this either,” Subburaj said.

The Chainalysis report also reflects this, stating that although India is the second largest cryptocurrency market in the world in 2021, it fell to fourth place in June of this year.

As crypto trading volume has steadily declined after July 1, it is likely to fall even further.

The direct comparison between June and July daily transaction averages on WazirX and CoinDCX reflects this fact. While WazirX registered $9.7 million in daily transactions in June, that number dropped to $3.3 million in July – a 66% drop.

“Given the current conditions, it is unlikely that the crypto market will recover immediately, thus leading to the overall decline of the Indian crypto market,” Subburaj added.

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