On July 1, India’s government issued a harsh new crypto tax, imposing a 1% levy on all crypto transactions. Since then, trading on the country’s crypto exchanges has cratered.
Trading volume on Indian exchange WazirX is down 68% since the law took effect. On other popular exchanges in the country such as CoinDCX and ZebPay, trading volume is also down 83% and 16%, respectively. Indian exchange Koinbazar appears to be an outlier, with trading volume up 7% since July 1. But despite the recent bump, Koinbazar’s trading volume has sunk since February, when India’s government first announced the crypto tax. Koinbazar has gone from handling $100 million in daily crypto transactions to $44 million now.
Indian crypto investors and entrepreneurs have long warned that the tax was too harsh and could collapse the crypto trading market in India, sending crypto investors and firms fleeing to friendlier jurisdictions.
“I want to live in India and promote the Web 3.0 ecosystem,” Sandeep Nailwal, cofounder of blockchain scaling platform Polygon and one of the country’s most prominent crypto entrepreneurs, told Bloomberg in March. “But overall, the way the regulatory uncertainty is there and how big Polygon has become, it doesn’t make sense for us or for any team to expose their protocols to local risks. The brain drain is absolutely crazy.”
Nailwal and his team moved Polygon’s de facto headquarters from India to Dubai in 2020, citing the country’s lack of clarity in regulating crypto. To this day, the India-founded Polygon reportedly does not maintain an office in India.
Indian media outlet CNBC18 recently estimated that 30 to 50 leading crypto entrepreneurs have relocated their businesses to Dubai and other, more welcoming locales in anticipation of India’s government imposing the new law.
A crypto exodus will have major implications for what has become the world’s largest crypto market by users. Over 100 million people in India own some form of crypto, a user base that’s nearly four times as large as the second-place U.S., according to broker comparison site BrokerChooser. The high usage rate in India may be due to the sheer size of its population—1.4 billion—but the country appears to have relatively high adoption rates, too. Last year, India ranked second behind Vietnam on research firm Chainalysis’ global crypto adoption index, which measures crypto trading volumes and other data from 154 countries.
The future of crypto trading in India now appears uncertain amid the new law and a global downturn in the crypto market. The country’s new crypto tax makes it one of the harshest tax jurisdictions for crypto traders. Since April 1, Indian crypto traders must pay a 30% capital gains tax and cannot write off losses to lessen their tax burden, according to the new law.