Trading dries up on India's crypto exchanges as new tax kicks in
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Those steep declines came from already depressed trading levels.
PHOTO: PEXELS
MUMBAI (BLOOMBERG) - Warnings from Indian crypto exchanges that a controversial new transaction tax would erode trading are coming true, with volumes evaporating since the levy took effect.
Three exchanges - ZebPay, WazirX and CoinDCX - saw the value of daily trading plunge by between 60 per cent and 87 per cent immediately after the 1 per cent tax deductible at source became effective on July 1, data from CoinGecko shows.
A fourth, Giottus, saw trading sink 70 per cent, its chief executive said.
Those steep declines came from already depressed trading levels as a combination of plunging prices, unfavourable tax treatment and difficulty getting cash onto exchanges combined to depress the once-hot market.
Binance-backed WazirX, for example, did US$3.8 million (S$5.3 million) worth of trading on July 2, the day after the tax known by the acronym TDS (tax deducted at source) took effect, CoinGecko data shows. In early July last year, it would have taken less than two hours of trading to reach that mark. Crypto exchanges trade 24 hours a day, seven days a week.
While long-term crypto holders are still buying and selling, market makers and high-frequency traders are "gone", said WazirX vice-president Rajagopal Menon.
Traders are also doing more peer-to-peer trading and migrating to so-called decentralised exchanges, he added.
The government introduced a tax regime for digital assets in February, consisting of the TDS and a flat 30 per cent tax on income from crypto investments. It also banned offsetting of losses on such assets, treating them differently from stocks and bonds.