India’s largest digital asset exchanges are bracing for a prolonged crypto winter – one with some unwanted local twists.
With token prices plummeting, customers unable to transfer funds to their accounts and a dreaded transaction tax on cryptocurrencies just around the corner, exchanges like Binance-backed WazirX have put expansion plans on the back burner.
“We have reduced all of our non-critical costs,” said Rajagopalan Menon, vice president of WazirX. “We only hire critical employees, we don’t spend any money at all. It’s literally crypto winter here,” he said, using industry jargon for an extended bear market.
WazirX is not alone. Rival exchanges Unocoin and BuyUcoin are also reacting to disappearing trading volumes in a market that last year ranked second in the world for crypto adoption.
That a crypto marketplace should be in cost-saving mode is no surprise – Coinbase Global Inc. and Crypto.com have announced layoffs in the past two weeks alone – but Indian exchanges face the added burden of a new tax system that executives fear will happen. wipe out what little trade is left. WazirX’s daily volume is down about 95 percent since October, data from CoinGecko shows.
On July 1, a 1 percent tax-deductible at source on all transfers of digital assets above a certain size will come into effect, despite industry warnings that it will undermine liquidity. That’s on top of an existing 30 percent rate on income from such assets plus a proposed VAT hike that makes its way through bureaucracy.
The government also does not allow trading losses on cryptocurrencies to be offset as they are treated differently from stocks and bonds.
To add to the pain, crypto exchanges have been largely cut off from the mainstream banking system since mid-April. At that point, India’s ubiquitous United Payments Interface was made unavailable to them without explanation, leading some banks and payment gateways to shut down the service as well, which in turn meant merchants couldn’t top up their accounts with cash.
It’s a remarkable turnaround from last year, when India was one of the world’s most popular crypto markets. The country’s cryptocurrency market has grown by more than 600 percent in the 12 months to June 2021, according to researcher Chainalysis, who used a statistic that estimates the total amount of crypto received in a country.
Crypto exchanges ran full-page ads in newspapers and signed up Bollywood stars to promote their offerings to one of the world’s youngest populations. Coinbase-backed CoinDCX became the official title sponsor of a cricket series between India and Sri Lanka.
“Last year was the golden age,” Menon said. “We went from six programmers to fifty in seven months.” WazirX has only added “a few developers and a few critical seniors” since that hiring spurt, he said.
Expenses for influencers
Not everyone steps on the brakes. CoinDCX, which raised $135 million in April from funds including Pantera Capital, has no plans to cut costs, Vinay Tiwari, its senior vice president for finance, said in an interview.
That makes it an outlier among exchanges.
BuyUcoin, a small exchange with 45 employees, only hires developers and engineers, said Chief Executive Officer Shivam Thakral. It also cuts back on things like partnering with social media influencers and avoiding mass advertising, Thakral said. BuyUcoin trading volume is down about 80 percent since its peak last year, he said.
“All companies are now cautious when it comes to spending, the same goes for us,” Sathvik Vishwanath, CEO of crypto exchange Unocoin, told Bloomberg. “We will continue to hire for key positions, but will not hire people for resignation.”
Vishwanath said he will assess the impact of the transaction tax, known by its acronym TDS, before making major strategic decisions. The trade association he is a member of has lobbied the government in vain for a cut in the TDS, he said.
With no immediate relief in sight, existing employees at WazirX may need to take on more work.
“If someone leaves the company, previous replacement was almost immediate,” Menon said. “Now we’re looking to see if anyone can double for that position.”
(This story was not edited by DailyExpertNews staff and was generated automatically from a syndicated feed.)