• Indians transferred $3.8 billion in crypto out of the country between February and October of last year.
• This was due to the strict crypto taxation rules imposed in India in February of 2022, including a 30% tax on crypto profits and a 1% tax deducted at source (TDS) on all transactions.
• Research by the Esya Center noted that domestic cryptocurrency exchanges had lost 81% of their trading volumes within four months following the implementation of the 1% TDS rule.
In February of last year, India’s legislature passed a law that imposed a 30% tax on crypto profits which included a 1% tax deducted at source (TDS) on all transactions. The law was passed on February 1, 2022, and applied to domestic exchanges, while the 1% TDS was implemented on July 1, 2022. The new regulations caused quite a stir in the Indian crypto community, with many arguing that it would inhibit the industry’s growth and affect liquidity.
In light of the new taxation policy, research conducted by the Esya Center noted that over $3.8 billion worth of crypto was moved out of India between February and October last year. This figure is a testament to the monetary effects of the strict crypto taxation laws imposed in the country. The report also highlighted that domestic cryptocurrency exchanges had lost 81% of their trading volumes within four months following the implementation of the 1% TDS rule.
One of the exchanges expected to be affected by the new taxation policy is WazirX, one of the largest cryptocurrency exchanges in India. The exchange has already seen a significant decline in its trading volumes since the implementation of the 1% TDS rule. This has led to a decrease in liquidity, as traders are now less willing to enter the market due to the increased taxes.
It will be interesting to see how the Indian crypto market will develop in the coming months and years, as the taxation policy has had a significant effect on the industry. Many traders have already moved their assets out of India in order to avoid the high taxes, and it will likely be difficult for the market to recover from this blow. Nonetheless, the Indian crypto market is still one of the largest in the world, and with the right policies in place, it could continue to grow and thrive in the future.