The implications of what anti-crypto regulations can do for a booming economy can be seen first hand in India. Supporting a massive decline in trading volumes across all Indian crypto exchanges, the WazirX report shows a change in investor sentiment as the Indian government introduced its second cryptocurrency law, a 1% Withholding Tax Deduction (TDS) on every crypto transaction.
Trading volumes on Indian crypto exchanges have ended up down by 90-95% since the country passed a law imposing a 30% tax on investors on unrealized profits. With two consecutive taxes poised to eat into their holdings, most Indian investors seem to have opted to hibernate amid an unrelenting bear market.
The volume of trading on the Indian crypto exchange fell by 90-95% 3 months after the new cryptocurrency laws came into force.
Based on current volumes, exchanges can only earn commission income between $1,000 and $3,000.
Bitbns seems to still be fine.
Tough times ahead. pic.twitter.com/KNDbea9BCn
— Crypto India (@CryptooIndia) July 4, 2022
Renowned Indian cryptocurrency exchanges WazirX and Zebpay surveyed about 9,500 active traders from the region to better understand investor sentiment. Not surprisingly, the survey showed that 83% of traders were forced to reduce their trading frequency due to TDS deductions.
WazirX and @zebpay recently conducted a Traders Opinion Survey which found that 83% of traders believe that the recent introduction of taxes has reduced the frequency of their trading.
Learn more about the survey https://t.co/Zim75TqslP
— WazirX: India Ka Bitcoin Exchange (@WazirXIndia) July 6, 2022
Another method by which investors in India avoided paying TDS was by selling their assets before the tax law was signed into law. More than 27% of investors, most of whom are millennials, ended up selling 50% of their portfolio by April 1, while 57% sold less than 10%. In this regard, Rajagopal Menon, Vice President of WazirX, stated:
“The results of the survey indicate the need to reform certain conditions in order to promote the growth of crypto investors in the country, which will lead to economic prosperity. The tax regime needs to be balanced to encourage participation and revive trade.”
As Indian investors look to international exchanges to avoid taxes, there are risks associated with trading on non-KYC exchanges with little or no oversight. ZebPay CEO Avinash Shekhar added:
“While India’s cryptocurrency tax policy is a step forward, revisiting some aspects will help create a more favorable regulatory environment for all stakeholders in the industry and ultimately contribute to overall economic progress.”
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Of the total, nearly 2,300 or 24% of investors surveyed shared their interest in trying out international cryptocurrency exchanges to avoid paying TDS during trading cycles, while 29% confirmed they had drastically reduced their trading activity.
The GARI network conducted an internal evaluation and found no obvious hacks that could bring down the prices of the token. The company stated:
“So far it looks like a market event. We assure our community that ALL tokens are safe in their respective reserves.”