Crypto-tax deters 83% of Indian investors from crypto-trading: WaxirX report

by Arthur · July 6, 2022

The implications of what anti-crypto regulations can do for a booming economy can be seen firsthand in India. A report by WazirX supports the massive decline in trading volume across all Indian crypto exchanges, revealing a shift in investor sentiment when the Indian government introduced its second crypto law – a 1% withholding tax (TDS) on each crypto transaction.

The trading volume of Indian crypto exchanges saw a possible reduction of 90-95% ever since the country introduced a law that would tax investors 30% on unrealized gains. With two consecutive taxes ready to eat away at their holdings, most Indian investors have appeared to have opted for hibernation in the midst of an irreconcilable bear market.

The trading volume of the Indian crypto exchange has fallen by 90-95%, 3 months after new crypto laws came into force.

Based on current volumes – Stock exchanges are only able to generate trading fee income of $ 1000 to $ 3000 Max.

Bitbns seem to continue to do well.

Tough times ahead. pic.twitter.com/KNDbea9BCn

– Crypto India (@CryptooIndia) July 4, 2022

Prominent Indian crypto exchanges WazirX and Zebpay surveyed around 9,500 active traders from the region to better understand investor sentiment. Not surprisingly, the survey showed that 83% of traders were forced to reduce their trading frequency due to the TDS deductions.

WazirX & @zebpay recently conducted a Trader Sentiment Survey which revealed that 83% of traders are of the opinion that recent tax implementation has deterred their trading frequency.

More about the survey https://t.co/Zim75TqslP

– WazirX: India And Bitcoin Exchange (@WazirXIndia) July 6, 2022

Another method that investors in India avoided paying TDS was by selling their holdings before the tax was signed into law. Over 27% of investors, most of whom were millennials, ended up selling 50% of the portfolio before April 1, while 57% sold below 10%. In this regard, Rajagopal Menon, VP of WazirX stated:

“The survey results determine the need to reform certain conditions to help the growth of crypto investors in the country that will result in economic prosperity. The tax regime must be balanced to encourage participation and revive trading volumes.”

With Indian investors looking at international exchanges to evade taxes, the risks associated with trading on non-KYC compliant exchanges come with little or no oversight. ZebPay CEO Avinash Shekhar added:

“Although India’s cryptocurrency policy is a step forward, a reassessment of certain aspects will help build a more supportive regulatory environment for all industry stakeholders and will ultimately contribute to overall economic progress.”

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Out of the party, almost 2,300 or 24% of the investors surveyed shared their interest in trying out international crypto exchanges to avoid paying TDS during trading cycles, while 29% confirmed that they had drastically reduced their trading activities.