When the Indian government started taxing cryptocurrency transactions, Binance saw a spike in users from the country.
A Huge Uptick in Binance’s User Base
A big influx of new users has recently joined the largest cryptocurrency trading platform in the world. This is because, as reported by Bloomberg, starting in July, the government has required a TDS of 1%.
According to Bloomberg, app downloads increased by 429,000 in August alone. In terms of 2022 statistics, this is the greatest number we have for India so far.
But not every cryptocurrency exchange saw a similar surge. Since the tax hike took effect, everyday trading volume at some of India’s crypto exchanges has dropped by more than 90%.
But some in the business said the new tax wasn’t clear enough for their needs.
Regarding the hike, SEBA India founder Rohan Misra said that the new criteria are ambiguous. Regulators left it unclear whether the 1% TDA applies to more than just spot transactions in cryptocurrencies or to crypto futures trading as well.
In addition, the new 30% tax on crypto token profits is used to cover the 1% TDA. Cryptocurrency traders have the same problem: they can’t deduct their losses from their winnings.
Virtual asset service providers in India aren’t the only ones feeling the pinch of a shrinking industry. The popularity of the FTX app, which is based in the United States, skyrocketed at the start of 2019. There was a decline in the company’s user base from January (when there were 40,000 users) to July (96,000 users) to August (52,000 users).
App downloads for Coinbase, a company owned by Coinbase Global Inc., fell from 31,000 in June to 16,000 in August.
Meanwhile, August saw a significant drop from January’s enormous 596,000 downloads of the Indian-based Wazirx app.
A New Tax Means New Problems
In India, crypto activities have been harmed by the introduction of the 1% TDS. The crypto industry lost steam as a result of the government’s decision to levy levies, which is a major problem.
As the country’s first crypto law, it has also left investors and traders uncertain as to its goals. As opposed to the 30% tax on unrealized gains that was proposed, they were hoping for more amiable guidelines.
Many cryptocurrency markets are on the verge of collapse because of the new policy. India recently saw a historic low in the trading of virtual assets. According to reports, investors are already considering offshore exchanges as a way to minimize their exposure to the hefty tax.
The authority’s decision has far-reaching consequences for local providers of virtual asset services. Investors in cryptocurrencies, it is thought, will not be put off by taxation. Yet the 1% levy acts like a capital lock-in by discouraging investors from relocating their money.
It follows that the government’s penalty is at issue, and not the TDS. With a fixed amount of money, a user can only make so many trades due to the tax rate.
Speculators are securing their positions in the cryptocurrency market in anticipation of more investor-friendly laws.
The tax increases were the only real complaint about the new rules. The government of India should think about reviving the cryptocurrency business to its former glory.