The Union government rule requiring tax deduction at source for every cryptocurrency transaction came into force on July 1 and the trading volume for major cryptos in the country declined by almost 70% in the first three days of July, say reports.
CoinDCX, WazirX, and ZebPay saw the major fall in trading volume between July 1 and 3, suggests data shared on Nomics.
In her Union Budget 2022 speech, Finance Minister Nirmala Sitharaman introduced a new tax for Virtual Digital Assets (VDAs) that taxes the gains from the transfer of such assets at 30% (plus applicable surcharge and cess) starting financial year (FY) 2022-2023.
Experts say it may be too early to say that the drop in traded volume is because of this new tax. But the results were there to see. Volumes on WazirX dropped by 82%, 76% on ZebPay and 70% on CoinDCX, crypto research and consulting firm Crebaco noted.
In recent weeks, cryptocurrencies, which are not backed by any underlying value, have witnessed massive volatility amid global uncertainties.
Reserve Bank Governor Shaktikanta Das recently described cryptocurrencies as “clear danger” and said that anything that derives value based on make believe, without any underlying conditions, is just speculation under a sophisticated name.
The government is in the process of finalising a consultation paper on cryptocurrencies after gathering inputs from various stakeholders and institutions.
On the drop in traded volume and possible impact of TDS, crypto behemoths say they would rather take a cautious approach instead of jumping to any conclusion. Rajagopal Menon, vice-president at WazirX, said the impact of new tax should be clear by the second week of July.
It is also widely believed that the current drop in stock exchange will further impact crypto exchange. Some media reports, however, suggest that the grey market would thrive despite the tax.
A crypto trader said that amid the uncertainty he will see if any kind of model is still profitable in the Indian exchanges or shift abroad. The crypto traders are clearly sceptical of the government intervention and hope for more crypto-friendly and user-friendly regulations in the months and years to come.
Crypto exchanges believe that retail investors as well as exchanges were panicking because of the new regulations.