Transaction volumes have plunged by 55 percent while domain traffic dropped by 40 percent on India's top cryptocurrency exchanges in the first two days after the crypto tax came into effect on 1st April, according to data shared by crypto research firm CREBACO.
Moreover, the data showed that between March 31 and April 1, volumes on WazirX have approximately dropped from over 7 crore to 4 crore, on CoinDCX from 1.9 crore to 1.2 crore, on Zebpay from 1.5 crore to 44 lakhs and on Bitbns from 1.1 crore to 96 lakhs.
“The volumes have gone down by 10-30 percent on most of the Indian crypto exchanges. People are still understanding what will be the direct and indirect implications of new tax rules. It may take a few more weeks for people to work around new strategies to reduce tax burdens,” said Sathvik Vishwanath, co-founder of cryptocurrency exchange firm Unocoin.
Starting from April 1, retail investors and crypto exchanges have started paying a 30 percent tax gain from virtual digital assets. The government has also announced a 1 percent TDS on these virtual assets starting July 1. Further, these investors will not be able to set off their losses, which is usually a provision in other types of assets, which will be adding to the woes of the investors.
“We did not expect the volumes to drop so significantly. But, this will definitely be restricting the industry rather than growing,” said Sidharth Sogani, founder of CREBACO. “Usually the Government puts a high tax on a new thing but gradually brings it down. But, crypto is a global phenomenon, and the repercussions will be much higher.”
Last year, WazirX clocked a trading volume of over $43 billion while Coinswitch clocked 14 million users.
“Lot of investors sold their crypto assets before March 31. The positive is that the uptick in prices has seen a lot of buyback post April 1. This is also attracting new and sceptical investors,” said Vikram Subburaj, CEO of Giottus, a crypto exchange firm.
He added, “The long-term investors are still invested in crypto and holding their assets. The reduction in portfolio diversification is only a temporary effect as investors don't want to spread their risk amidst the prevailing confusion. We might also find a change in how short-term and day traders transact.”
Queries sent to the other crypto exchanges did not elicit any response till the time of publishing this story.
Long term investors are expected to show more activity on centralised exchanges. Further, over the last one year, a lot of youngsters had invested in cryptocurrencies including the millenials and Gen Z. This customer profile is expected to change dramatically over the next few months, say the experts.
Further, experts also said that with this new tax regime, investors will not be keen on emerging cryptocurrencies. Last year, Shiba Inu (SHIB), Dogecoin (DOGE), Matic (MATIC) were among the most-traded cryptocurrencies in India.
Last week, Moneycontrol reported that this new move of crypto tax will be a major hurdle for the smaller investors and is anticipated to drive the retail investors to the grey market, that is the decentralised exchanges.
Decentralised crypto exchanges (DEXs) do not require any documentation and allow users to directly hold all their assets in their own wallets.“Over the last few months, we have already seen a lot of brain drain happening, and if entrepreneurs move out, talent will also move out,” Sogani added.