A 30% tax on income from cryptocurrency and other virtual assets was followed by the government’s decision to add a 1% withholding tax (TDS) on cryptocurrency transactions to from July 1 of this year. Although this appeared to be the first step towards the regularization of the sector, there is the feeling that the industry is reeling from the negative impact of these measures. “From a cryptocurrency trading volume perspective, it has dropped. The implementation of these tax laws has caused Indian cryptocurrency markets to stagnate. Prices are also falling. Short term and day traders will be affected due to the implementation of 1% TDS,” BuyUcoin CEO Shivam Thakral told FE Online.
The industry expert opined that the government’s decision will drive investment away from international players. According to Anndy Lian, President of the BigONE exchange, this will affect market liquidity and foreign investors will seek to stay away from Indian markets. “It will not be sustainable for long-term investors. Active traders will be affected as it would reduce day trading. General market conditions would deteriorate as more Indian cryptocurrency exchanges will seek to set up shop outside,” he added.
Even though multiple discussions continue to revolve around the need to regularize the sector, with a defined policy framework, Indian exchanges remain uncertain of the immediate impact. According to Gaurav Dahake, CEO of Bitbns, from an implementation perspective, it is still unclear whether the exchange or the buyer would be liable for the tax deduction. “I think trading volumes went down by 40%, after the implementation of the 30% taxation. We are still asking the government how they plan to implement the new taxation,” he added .
It should be noted that due to the impending uncertainty over regulations and policies, a few companies have already shifted their base to other markets such as Dubai. “The transition of Indian exchanges will impact the overall cryptocurrency scenario within a year. I believe that the Indian government will see a huge influx of cryptocurrency investors and developers in the near future,” Lian said.