India’s tax rules on cryptocurrencies, which came into effect last April, have seen local exchanges lose the lion’s share of the market to those run by foreign players, according to a new report.
Binance, Coinbase and other foreign exchanges held 67.6% of the crypto market share in India as of October 2022, up from 50% in November 2021. According to a study by the Esya Centre, a technology policy think tank based in New Delhi, Indians have moved more than USD 3.8 billion from local crypto exchanges to international ones after the country announced tough rules for taxing cryptocurrencies in February last year.
The 30% tax went into effect on 1 April and the 1% TDS came into effect on 1 July. Indian exchanges including WazirX, CoinSwitch and CoinDCX lost a whopping 81% of their trading volume in the four months from July to October, Esya said, attributing the trend to local TDS rules.
“These imply that India is not only losing out on international competitiveness in the VDA (virtual digital asset) ecosystem, which is closely linked to several emerging technologies, but also on scarce liquidity which is important for concurrent economic value creation in the country,” Esya wrote.