India’s crypto tax regime came into effect on July 1, 2022.
Exchanges like CoinDCX, WazirX, and ZebPay have seen drops in trading volume as high as 87% since the policy came into effect.
Bloomberg said high-frequency traders and market makers might increasingly leverage other options.
Decentralized exchanges could become the preferred destination for traders.
Indian officials first announced its crypto tax structure back in February 2022, as EWN reported.
Indian cryptocurrency exchanges saw debilitated trading volumes following the introduction of a 1% digital asset tax policy which kicked in on July 1, 2022.
Bloomberg reported on Tuesday that trading platforms recorded a massive decrease in daily trading activity. According to the news house which cited data from CoinGecko, four exchanges including some of India’s biggest digital assets platforms like CoinDCX, WazirX, ZebPay, and Giottus experienced dips in transactions as much as 87%.
Trading volumes on exchanges reduced on average between 60% and 70%, per the report.
While daily trading activity dwindles, another phenomenon also emerged in the wake of India’s latest tax regime. WazirX Vice President Rajagopal Menon opined that high-frequency traders and market makers are now “gone”
Menon surmised that decentralized exchanges like Uniswap and peer-to-peer trading platforms could become the preferred option for Indian traders in the coming months. The VP also noted that long-term hodlers continue to deploy cash and scoop up tokens during the ongoing market slump.
Although other factors such as market uncertainty and token prices could also be behind reduced trading volumes, the report points out India’s crypto tax policy as the chief reason behind the latest trading pattern.
India’s Crypto Tax Threatens Digital Asset Economy
As EthereumWorldNews reported, India first announced a 30% tax on crypto gains in February. The policy was later approved by Parliament in March despite heavy criticism from local industry stakeholders and companies.
Another 1% tax deducted at source (TDS) was also introduced. Trading volumes on local exchanges have reportedly slowed down since India’s 30% crypto tax regime came into effect on April 1, 2022.
The matter further escalated on July 1, 2022, after the 1% tax was passed into law.