India’s crypto industry may have to wait for up to two years for a more lenient crypto tax regime, as per domestic exchange WazirX’s CEO.
Last year, Indian authorities introduced a 1% Tax Deducted at Source (TDS) on cryptocurrency transactions, which led to a significant decline in trading volumes.
This move prompted market makers and high-frequency investors to reduce their involvement due to the increased costs.
A local exchange even attributed a 97% drop in trading volumes at domestic exchanges to this tax in just 10 months.
In an interview with Bloomberg, Nischal Shetty, the CEO of WazirX, expressed his doubts about an immediate reduction in the TDS, citing the absence of formal discussions between the cryptocurrency industry and lawmakers on this matter.
India to Play Catch Up in Regulating Crypto
While India has called for a globally coordinated approach to cryptocurrency regulations this year, countries such as Hong Kong, Dubai, and the European Union have surged ahead by establishing their own regulatory frameworks.
These efforts aim to safeguard investors and provide clarity for digital asset companies, some of which are considering expansion beyond the United States due to increased regulatory scrutiny.
Despite the uncertainty, Shetty remains hopeful that India will take some steps toward a more favorable crypto policy, although the specific measures are yet to be defined.
The TDS has driven many Indian investors away from local crypto trading platforms in favor of overseas-based exchanges.
CoinDCX, a rival of WazirX, reported in an August report that Indian exchanges lost over 2 million users between February, when the tax was announced, and December of the same year.
During this period, overseas platforms attracted more than 1.5 million customers from India, according to CoinDCX estimates.
“Purpose of Introducing TDX has Failed”
Earlier in an interview with CryptoNews, Chief Public Policy Officer at CoinDCX, Kiran Mysore Vivekananda said that the central government’s purpose of introducing TDS has failed. He said that the government introduced a direct tax on crypto in an attempt to discourage people from investing in the asset class. However, crypto adoption in India has only grown. He further cited that their data shows 18% of active users on top five foreign exchanges are Indian.
As reported earlier, a Chainalysis report shows India as the leading country in adopting crypto on various parameters. Crypto transaction volume in India is also reportedly second-highest in the world.