Top crypto exchanges in the country reported a steep drop in trading volumes, to the tune of over 10-30 per cent, following the implementation of the 30 per cent crypto tax on gains on virtual digital assets (VDA) from April 1. Exchanges called it a panicked reaction to the tax new regime which is expected to settle down in the short term.

“People are still understanding what will be the direct and indirect implications of the new tax rules. It may take a few more weeks for people to work around new strategies to reduce tax burdens,” Sathvik Vishwanath Co-Founder and CEO, Unocoin, told BusinessLine.

He added, “We are foreseeing the volumes to stabilise over the next few weeks. Just that the new tax regime is making people to be cautious to comprehend it before taking bigger bets in this investment industry.”

What’s in the offing?

While a drop in trading volumes in the beginning of a new financial year is a common occurrence, CoinDCX is expecting a sharper decline this year.

Minal Thukral, SVP, Growth and Strategy, CoinDCX, said, “The trading volume was the highest on March 31 as users/ investors squared off their positions before the start of the new financial year. Starting April 1, there has been a decline, which is a usual trend at the start of every financial year. However, this year we are seeing a sharper decline due to the stringent tax laws.”

Apart from the 30 per cent tax on gains, the investors will also pay a 1 per cent TDS on every transaction starting from July. This will especially impact intraday traders.

Unlike its peers, CoinSwitch Kuber claimed to have not seen any significant drop in their trading volumes since most of their investors are seeing cryptos as an asset that appreciates over time, the exchange said.

“That said, high-frequency traders provide liquidity in the crypto market, enabling efficient buying and selling of assets. These traders operate on extremely thin margins, and locking up their capital with high TDS will restrict their ability to operate, lowering market liquidity and eventually impacting retail investors,” Ashish Singhal, Founder and CEO, CoinSwitch said.

Revenue loss for govt

Dubai-based Gather Network, which is into crypto mining and has just entered India, feels a tax regime like this will only hamper the various technology projects around crypto being planned in India.

Reggie Raghav Jerath, Founder and CEO, Gather Network, said, “Some top projects in the world incorporated in India and based in India are slowly moving away. It is the same with traders — any largely profitable trader will look to move their profits outside and work with outside exchanges.”

He added, “It can be a revenue loss for the Indian government going on from the taxation point of view, percentages should be revised. Otherwise, that may cause a major issue on revenue coming from the taxation, probably it’s going to go down. A more forward pacing policy embracing the current atmosphere can be more beneficial in the long run.”

‘Premature to predict’

Nischal Shetty, Founder, WazirX, however said it is still premature at this point to predict anything with certainty. “We are seeing strong global trends favouring crypto adoption, but we will have to wait for the India story to unfold. It is still premature at this point to predict anything with certainty. However, I believe we will have some idea by the second or third week of April on whether crypto taxes will impact the industry or people will still trade and not worry too much about the changes.”

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