India’s new cryptocurrency tax has dealt a heavy blow to the country’s crypto exchanges, contributing to broader sectoral problems and pushing trading volumes down by up to 90%.
The 1% tax on Indian cryptocurrency transactions from the beginning of this month was a further discouragement for investors in a market where a cumbersome regulatory regime and a 30% digital income tax had already reduced volumes by 60-70%, traders and industry executives said.
“We are scraping the bottom of the barrel in terms of volumes,” said Rajagopal Menon, vice president of the WazirX crypto exchange.
“The amount of regulatory clutter, the lack of ease of doing business and the paperwork created with every single transaction has made investors and traders wary and we are seeing people move to international exchanges or to the gray market.”
While the Indian stock exchanges have been hit, trading volumes have risen globally as the prices of cryptocurrencies have fallen.
Top exchanges traded a maximum daily volume of $137 billion when bitcoin price plummeted on May 11, up 84% from April, specialist research firm CryptoCompare said in a report.
Bitcoin, the world’s largest cryptocurrency, has had its worst quarter on record, with a price drop of 56% and a still challenging outlook.
Lower trading volumes have dragged down earnings for Indian exchanges, which have cut back on marketing and recruiting while developing strategies to weather a protracted downturn.
“Several companies are firing people after hiring a huge number last year and now need to look at operational and other business cost-cutting measures,” said Kumar Gaurav, founder of digital bank Cashaa.
The recent woes for Indian crypto exchanges could also lead to consolidation, some executives have said.
“A bear market is a cleansing process and weak companies will go under, while companies with the right business model will emerge stronger,” said Ashish Singhal, CEO of CoinSwitch.
(Disclaimer: CoinSwitch is an advertiser on the DailyExpertNews network)
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