Indian Crypto Exchange Urges Tax Relief to Bring Trading Back Home
Indian cryptocurrency exchange CoinDCX has demanded a revision of the nation's crypto tax policy. The exchange claims that the current tax structure, introduced in 2022, has not served its intended purpose and has instead prompted the transition of Indian crypto trading activities to overseas platforms.
CoinDCX Calls for Tax Reduction to Curb Exodus to Overseas Platforms
The Indian government initiated a 1% Tax Deducted at Source (TDS) on crypto transactions last year, with the primary objective of monitoring cryptocurrency transactions rather than generating additional revenue for the state. However, CoinDCX has stated that this tax policy has failed to fulfil the objectives and therefore needs reconsideration.
Sumit Gupta, CEO of CoinDCX, expressed his concerns, stating, "The whole purpose of the TDS was to track and trace transactions, but that is getting defeated," as quoted by Bloomberg. Gupta emphasized that, due to this tax, 95% of Indian crypto trading now occurs on overseas platforms that Indian regulators can hardly monitor.
This taxation policy has led to far-reaching consequences. Market makers have pulled out of Indian exchanges due to increased operational costs, which has adversely impacted liquidity and discouraged trading activities. While other global crypto markets are experiencing a surge in trading volumes, domestic platforms in India are caught in a state of uncertainty.
CoinDCX, with a valuation of USD 2.15 billion in a funding round in April 2022, now witnesses a significant decline in its revenues, which currently stand at approximately one-third of those registered before the 1% tax was introduced last year. The company has been compelled to reduce its workforce by 12%, while compliance costs shot up as the government extended anti-money laundering regulations to the crypto sector.
Government Urged to Reconsider Crypto Taxation Policy
India also imposed new penalties for crypto tax evasion in February this year. Besides, the TDS, India imposes a 30% tax rate on crypto profits, and the recent budget for 2023 did not make any alterations to the existing tax regime on crypto transactions. This has left the crypto industry, investors, and traders in India without any tax relief.
Gupta remains hopeful for more regulatory clarity after the general election next year, expecting the government to provide a more comprehensive stance on crypto matters by the end of 2025. As India holds the G20 presidency, it has called for a unified global approach to crypto regulation through international institutions. The Economic Affairs Secretary, Ajay Seth, recently signaled New Delhi's intent to finalize its position on crypto in the coming months.
Although trading activity on Indian exchanges has witnessed a significant decline, the adoption of cryptocurrencies in India continues to rise through alternative channels, including offshore crypto trading and various financial services. Chainalysis, a blockchain analytics firm, reported that Indians received crypto assets amounting to approximately USD 250 billion in the year through June.
Do you think the Indian government will heed CoinDCX's call for a revision of its crypto tax policy? Please share your thoughts and opinions in the comments section below.
Image source: Crypto Times
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