MUMBAI: There has been a sharp drop in trading volumes since India’s new cryptocurrency tax went into effect on July 1, adding to broader sectoral woes and sending trading volumes down by up to 90% in just a few days.
As a result of the new 1% tax on Indian cryptocurrency trades that has been implemented from the beginning of the month, investors in an industry where a burdensome regulatory regime and a 30% digital income tax have already caused volumes to drop by 60-70% have been further disincentived.
According to Rajagopal Menon, vice president of the WazirX crypto exchange, it appears that the exchange is scraping the bottom of the barrel when it comes to volume.
We see that investors and traders are becoming cautious as a result of the regulatory tangles, lack of ease of doing business, and paperwork that has been imposed on every single transaction which has caused them to move to the grey market or to international exchanges.
In spite of the fact that Indian exchanges have been impacted by this fall in cryptocurrency prices, global trading volumes have edged higher.
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CryptoCompare, a specialist research company, said top-tier exchanges traded $137 billion daily when bitcoin price dropped sharply on May 11.
In the last quarter of this year, Bitcoin, the world’s largest cryptocurency, suffered the worst quarter ever, with the price falling 56% and the outlook still looking bleak.
Indian exchanges have experienced a decline in trading volume that has led to a fall in revenue, which has led them to cut back on marketing and hiring activities while formulating strategies to weather any prolonged downturn that may occur.
In spite of hiring a large number of people last year, several companies are now laying off people as a result of cost-cutting measures being implemented by their operations and other departments.” said Kumar Gaurav, the founder of digital bank Cashaa.
Some executives have suggested that the recent woes for Indian crypto exchanges could also prompt consolidation in the future.
There is no doubt that a bear market is a cleansing process, and over time weak businesses will perish, while companies with the right business model will emerge stronger,” said Ashish Singhal, CEO of CoinSwitch.
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