Indian crypto exchanges lost around 97.1% of their trading volume between January and October 2022, according to recent research.
The report by Indian technology policy think tank Esya Centre studied three major Indian exchanges, including WazirX, CoinDCX, and Zebpay. The study bears significance since it provides the first monetary estimate of the impact of India’s crypto tax.
From around $4.73 billion in January, trading volume on Indian exchanges tanked to $137.6 million by October 2022, as per the research study.
Between February and October, around $3.85 billion in trading volume fled from Indian exchanges to foreign counterparts, the study revealed. The research included trading volumes from three international exchanges — Binance, Coinbase, and Kraken.
Much of the drop in trading volumes of India’s centralized exchanges (CEXs) came after India announced a steep 30% tax on all crypto transactions on February 1, 2022. The tax came into effect on April 1.
In the period between the tax announcement and its implementation, trading volumes on Indian exchanges dropped 15%, the study noted. After the tax was implemented, Indian CEXs lost another 14% in trading volume between April and June.
Around $3.05 billion in trading volume — 80% of the $3.5 billion lost to foreign exchanges — moved to international CEXs between April and October, the study found.
The majority of trading volume loss occurred after the government levied a 1% tax deducted at source (TDS) from July 1. Following the TDS implementation, Indian exchanges lost 81% of their trading volume in 4 months, the study noted. From $1.22 billion in July, the trading volume fell to $988 million.
The 1% tax was implemented on all transactions exceeding INR 10,000 (around $120) in a financial year. The tax announcement and its subsequent implementation created chaos. Crypto exchanges fumbled to figure out how to implement the 1% tax amid a lack of clear guidelines.
Many Indians denounced the steep 30% tax rate, and most migrated to foreign crypto exchanges in a bid to escape the 1% tax. Starting in…