The trading volume on crypto exchanges CoinDCX, WazirX and Zebpay declined by at least 70% on July 3 compared to June 30, even as a rule for tax deduction at source on each transaction came into effect from July 1.
According to data from crypto research and consulting firm Crabaco, volume was the highest on WazirX, down 82%. Nearly 70% on CoinDCX and 76% on ZebPay.
While crypto exchanges say it is too early to know the real impact of Tax Deduction at Source (TDS) as trading volumes are usually low over the weekend, some experts said that trading would likely remain under pressure.
“It is still premature to predict the ramifications of TDS. We will be better able to understand this by the second week of July,” said Rajagopal Menon, vice president at WazirX. “There has been a fall in trading across the industry as investors shift to hold, and there may be another dip as traders see their capital getting locked while trading on KYC-compliant Indian exchanges,” he added.
Senior executives in the cryptocurrency industry said the new TDS of 1% was introduced to sell and transfer virtual digital assets, which will prompt traders to exit Indian exchanges and strategize their playbooks.
Last year, continued interest from investors led to a massive increase in volumes on crypto exchanges. According to industry estimates, the top five to six Indian crypto platforms traded $70-100 billion in trading volume in 2021, with WazirX alone doing around $43 billion.
Due to global macroeconomic conditions, industry insiders expect the decline in trading activity to be further intensified by the bear market.
Meanwhile, someday traders told that in this scenario, the grey market would continue to flourish, and they would try different models to see if staying on the Indian exchanges would be profitable.
Shaunak Shetty, 28, from Mumbai, said his daily assets under management have come down from Rs 14 crore in March to Rs 50 lakh.
“From March 31, I stopped most of my operations, but from Friday, I’ve sliced that even further. This financial year, I will test on small accounts to see if any kind of model is still profitable,” said Shetty, a crypto portfolio manager. “Like other traders, I am trying to figure out if it’s possible to stay profitable on Indian exchanges. This will lead to another brain drain of professional traders to other countries like Dubai that are more welcoming,” Shetty said.
Another trader from Mumbai, who requested anonymity, said: “Whatever little trading I did on Indian exchanges, I will stop now.”
“The crypto peer-to-peer market with thousands of direct buyers and sellers in India will trade even more on decentralized or international exchanges. Until the government’s regulation does not become more crypto-friendly and user-friendly, these little grey markets will keep growing, unfortunately,” he said.