Jannat Ara

Challenges Persist for India’s Booming Crypto Market Amid Taxation Concerns

India’s rapidly growing crypto market is facing significant hurdles, primarily due to the country’s high cryptocurrency tax rates, despite the surge in Bitcoin prices driving increased demand and trading volumes on cryptocurrency exchanges.

CoinDCX, a prominent Indian crypto platform, has witnessed a staggering fivefold increase in trading volumes over the past month, rising from $5 million at the beginning of February to approximately $25 million by month-end. Sumit Gupta, CoinDCX’s co-founder, attributes this substantial growth to the upward trend of Bitcoin prices.

Similarly, WazirX, Mumbai’s leading cryptocurrency exchange and India’s largest, has seen a 20-fold surge in trading volumes since the start of 2024. Rajagopal Menon, WazirX’s vice president, notes a significant uptick in new user registrations and daily website traffic, citing the positive market sentiment fueled by rising Bitcoin prices.

However, despite the surge in interest, trading volumes have not yet reached peak levels, partly due to the heavy taxes levied on crypto transactions in India. The government imposed a 30% tax on cryptocurrency profits and a 1% tax on all transactions in 2022, impacting retail investments, according to Menon.

Concerns from Indian authorities regarding the risks associated with crypto trading, including potential money laundering, also contribute to regulatory caution.

Nonetheless, some industry insiders view the tax regime as the Indian government’s tacit recognition of cryptocurrencies as legitimate investment assets.

Sumit Gupta highlights the progress made by the industry in recent years, including the government’s move to include the Virtual Digital Assets (VDA) industry under the Prevention of Money Laundering Act, 2002. However, regulatory challenges such as tax provisions introduced in the Finance Act of 2022 remain a deterrent for further adoption.

The need for regulatory clarity and confidence in the Indian crypto market remains paramount for sustained demand. Sidharth Sogani, founder of Crebaco, emphasizes the importance of distinguishing between the legal and regulated status of cryptocurrencies in India, asserting that regulation would significantly alter market dynamics.

Indian Finance Minister Nirmala Sitharaman has expressed that Bitcoin and other digital assets should not be considered currencies, advocating for a comprehensive regulatory framework for cryptocurrencies within the G20.

Sumit Gupta underscores the significance of global collaboration among policymakers to develop an effective regulatory framework for cryptocurrencies. He believes that such collaboration would facilitate resource pooling, knowledge exchange, and expedited progress toward establishing a regulatory framework that minimizes regulatory arbitrage.

Powered by Crypto Expert BD

Follow us on Twitter: https://x.com/CryptoExpert_BD

Join our Telegram channel: https://t.me/CryptoExpert_BD

Leave a Comment