Pin Drop Silence in Indian Digital Asset Industry
Not long ago, the Indian digital asset industry was one of the fastest-growing industries in the world. Even the central bank of India was convinced that it had to provide a central bank digital currency (CBDC).
Crypto activity in India has reduced significantly since April and presently there is pin-drop silence.
One of the reasons why the Indian crypto market is so dead now is because of the FTX collapse.
The exchange’s downfall has made things worse in a country where the regulatory pressure was already tremendous around cryptocurrencies.
The Reserve Bank of India (RSI) is the most aggressive and highly strict regulator in the entire world when it comes to cryptocurrencies.
From time to time, the regulator has demanded the banning of cryptocurrencies and it has even raised its concerns over crypto on a global scale.
The regulator has even demanded the formation of a global regulatory authority to keep an eye on the crypto firms and projects.
Indian Crypto Trade Volume was Reduced Significantly
Most of the Indian crypto exchanges were either associated with FTX or Binance. Hence, when FTX collapsed, it subsequently impacted overall crypto trading volume in India at major exchanges in the country.
Resultantly, crypto trade volume in India was reduced to roughly 35 to 50% which was duly noted by Indian media.
However, FTX couldn’t be blamed alone for India’s crypto trade volume reduction as even prior to FTX, the market went significantly low.
Of course, the crypto winter seasons had their effects on the Indian crypto market as well.
This is so true because since the beginning of 2021, India’s top crypto exchange, WazirX, noted an approximately 98% reduction in exchange trade volume.
Sidharth Sogani Explains Reduction
Sidharth Sogani, a CEO of an Indian blockchain research firm called Cerebaco had an explanation with regard to crypto trade volume reduction. Sogani told the media that he doesn’t believe FTX has anything to do with the reduction.
He further explained that the Indian crypto market went into a silent mode in April much before FTX had gone bankrupt.
According to Sogani, the Indian market is unlikely to rebound any sooner and would require at least six months’ time to show recovery.
India’s Crypto Market Revival Relies on Major Announcements
He mentioned that for the Indian market to revive, the market would desperately rely on major announcements, preferably from the Union Budget.
On the other hand, Rajagopal Menon, VP of Wazirx, suggested that crypto taxation has pushed back the Indian crypto market.
He stated that Indians are reluctant in trading on local exchanges because they would be subject to taxes under CGT and TDS.
Double-Edged Sword of Taxation
Through 2022’s Union Budget, Indian Government introduced crypto tax levies and collections under a new set of taxation rules.
Authorities were asked to collect tax under Capital Gain Tax (CGT) and Tax Deducted At Source (TDS). The taxpayers’ community, particularly those involved in crypto trading, were not pleased with the crypto tax levy.
Tax Levy Structure
The taxpayers criticized the crypto tax by labeling it as the ‘double-edged sword’.
However, the law remained unchanged and crypto tax is being collected in India as of now. A tax levy of 30% on the income earned from the digital asset (including crypto and non-fungible tokens) has been imposed.
Furthermore, a 1% tax under the ‘TDS’ head is imposed on all crypto transactions over and above Indian Rupee 10,000 (equivalent to US$121).
Menon said that until and unless an intriguing event doesn’t happen, he cannot foresee crypto trade volume becoming normal again.
Indian Crypto Community Acting Cautiously
The majority of the Indian crypto community remains unharmed from FTX infection. However, it seems that the silence in the market is rather deliberate and not because of any forced events.
Indian community may be waiting for the crypto winter season to end and, in the meantime, has become cautious of the prevailing conditions.