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According to a new report, India’s virtual currency tax rules, which came into force last April, forced local exchanges to cede a large share of the market to exchanges operated by foreign players.
According to New Delhi-based think tank Esya, Binance, Coinbase and other forex accounts for 67.6% of the Indian cryptocurrency market share as of October 2022, up from 50% in November 2021. increase.
Between February 2022 and October 2022, when India announced its cryptocurrency tax policy, $3.8 billion in trading volume moved from domestic centralized exchanges to offshore-operated exchanges. The report states (PDF).
Indian exchanges such as WazirX, CoinSwitch and CoinDCX lost a whopping 81% of their trading volume in the four months from July to October, Esya said, citing the trend as a result of local TDS rules. increase.
India is one of the countries taking a strict approach to cryptocurrencies. Starting to tax cryptocurrencies last April, she imposed a 30% tax on profits and a 1% deduction for each cryptocurrency transaction.
The report alleges that traders are moving to forex because they believe they can hide their activities from local authorities. We offer on-ramp and off-ramp features so users don’t have to deal with businesses.
Additionally, many forex including KuCoin and Gate allow crypto trading within a certain capital limit (usually thousands of dollars per day) without KYC details. Decentralized exchanges such as DYDX do not require KYC by design. In the past, Indian exchange heads have warned that Indian taxation would force users to switch to unregulated entities.
“These are not only India losing its international competitiveness in the VDA (Virtual Digital Asset) ecosystem, which is closely linked with some emerging technologies, but also important for creating economic value domestically at the same time. It suggests that liquidity shortages are also missing,” Esha wrote.
“Importantly, the impact of the current VDA architecture on government tax revenue is also unknown.”
The report urges the Indian government to reassess virtual currency taxation, suggesting at least a 1% TDS tax exemption on transactions.
The majority of local governments remain the most vocal opponents of cryptocurrencies. The governor of India’s central bank last month warned that private cryptocurrencies would trigger the next financial crisis unless their use was banned.
The central bank last week prioritized the development of a global regulatory framework for unbacked cryptoassets, stablecoins and decentralized finance under India’s ongoing G20 presidency, stating: [their] Ban. “
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