Coindcx Criticizes 1% Tax for Hampering Local Crypto Market and Boosting Overseas Trading
In a recent appeal, Coindcx, a prominent cryptocurrency exchange in India, has called on the Indian government to lower the 1% tax imposed on crypto transactions. Introduced in 2022, this tax was designed to track transactions rather than generate significant revenue. However, Coindcx argues that it has had the opposite effect, driving 95% of Indian crypto trading volumes to foreign exchanges where oversight is limited.
Negative Impact on Domestic Trading
According to Sumit Gupta, CEO of Coindcx, the tax has created substantial obstacles for domestic trading. Market makers have exited Indian platforms due to the increased cost burden, resulting in lower liquidity and decreased trading activity. Since the tax’s introduction, Coindcx’s revenues have plummeted to one-third of pre-tax levels, leading to a 12% reduction in staff and increased compliance costs. The firm also faces challenges from new anti-money laundering regulations and a 30% tax rate on crypto profits.
Call for Enhanced Regulatory Clarity
Gupta expressed hope that regulatory clarity may improve after the upcoming general elections, potentially leading to adjustments in the government’s stance on cryptocurrency regulation. As the G20 presidency holder, India is advocating for a unified global approach to crypto regulation. Despite the downturn in local exchange activity, overall crypto adoption in India is on the rise through offshore trading and related financial services. Chainalysis reports that Indian residents have received approximately $250 billion in crypto assets through June 2024.
Regulatory Context and Future Outlook
The 1% tax, along with the 30% profit tax and new penalties for tax evasion, has compounded the difficulties faced by the Indian crypto industry. The government’s failure to address these concerns in the 2023 budget has left many in the industry hopeful for change in the near future. With the global crypto regulatory landscape evolving, India’s approach could significantly impact the sector’s growth and development.
