Tax, regulatory uncertainty could hit India’s crypto ranking

According to crypto market analysis firm Chainalysis’ 2022 Geography of Cryptocurrency report, India was the most valued cryptocurrency market in Central, South Asia and Oceania (CSAO). Between July last year and June this year, the Indian cryptocurrency investment market was valued at $172 billion – significantly ahead of second-place Thailand, which pulled in less than $150 billion. However, since the unveiling of Budget 2022, heavy taxation of crypto investments in India, coupled with a lack of clarity on how such investments will be regulated, has caused stock markets to take a hit.

Data from crypto market tracker Crebaco Global from April this year to September 14 shows a clear drop in daily trading volumes on WazirX and CoinDCX—two of India’s largest crypto exchanges. On WazirX, average daily transactions were $23.2 million in April – a figure that is now down to $1.3 million this month, marking a drop of over 94%.

Also on CoinDCX, daily trades fell from $13.1 million in May to $1.4 million on September 14.

WazirX saw its quarterly trading averages fall 86% sequentially to $6.9 million in the September quarter from $48.9 million in the June quarter. CoinDCX’s quarterly trading fell to $6.3 million this quarter – down 79% from $29.8 million in the June quarter. While the September quarter is yet to be completed, average daily trading on these exchanges does not show any significant upturn.

Vikram Subburaj, CEO of homegrown cryptocurrency exchange Giottus, said that at the moment the decline in the market reflects a domino effect, added to by a number of factors.

“The implementation of TDS, which came into effect on July 1, had a major impact on the liquidity of the Indian crypto exchanges. The addition of this tax on crypto profit margins means that investors are wary of executing trades – as the latter is no longer profitable for them. This has had a major impact on trading volumes in stock exchanges and the prevailing global economic conditions have also not helped this,” said Subburaj.

Chainalysis’ report also reflects this, saying that while India was the second largest cryptocurrency market in the world in 2021, it had already fallen to fourth place as of June this year.

Given that crypto trading volumes took a dive after July 1st, it is likely to have declined further.

A direct comparison between June and July daily trading averages on WazirX and CoinDCX reflects this fact. While WazirX recorded $9.7 million in daily trades in June, that figure dropped to $3.3 million in July – a 66% drop.

“Given the current conditions, the crypto market is unlikely to recover in the immediate future, thus leading to an overall slowdown in the Indian crypto market,” Subburaj added.

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