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This year has seen crypto trading volumes in India record significant declines. The problem has only been exacerbated due to the downfall of the FTX crypto exchange, as it has hurt investor sentiments.
According to local crypto experts, it is highly unlikely that there would be any recovery anytime soon unless the upcoming Union Budget introduces something dramatic.
Crypto trading volumes fall
Major crypto exchanges in India have seen a significant drop in trading volumes this year. After the collapse of the FTX crypto exchange, there was a drop in trading volumes of 34% to 50%.
However, it was not just the FTX implosion that contributed to the drop in trading volumes, as it has been happening long before that as well.
Wazirx, which is one of the biggest crypto trading platforms in the country, saw its trading volumes fall by 97.99% from the start of the year until December 2nd.
Sidharth Sogani, the CEO of research firm Crebaco, said that he did not think that a lot of the decline in trading volume recently was only because of FTX.
He stated that the Indian crypto market has been dead since April. He said that he did not expect the sector to see recovery or action in the next six months until the Union Budget announces something major.
The taxes
Rajagopal Menon, the vice president of marketing at Wazirx, said that the trading volumes on Indian exchanges had declined because of the taxes introduced in the country.
The new laws introduced this year have implemented the capital gains and tax deducted at source (TDS) on crypto transactions and there is no setoff for losses.
The Union Budget for this year saw an income tax of 30% introduced on virtual digital assets, which include non-fungible tokens (NFTs) and cryptocurrencies.
In addition, it also rolled out a TDS (tax deducted at source) of 1% on all transactions of 10,000 rupees. Menon said that the Union Budget of 2023 would have to introduce something dramatic to bring some change.
The FTX collapse
An executive of a leading crypto exchange said that the FTX crypto exchange had not affected Indian users significantly, other than in terms of sentiment.
The FTX downfall only exacerbated the negative sentiment that had been associated with the crypto sector.
After the introduction of TDS, most Indian investors shifted to Binance rather than FTX because the former offered peer-to-peer (P2P) transactions.
Those trading in Indian rupees can only use exchanges like Binance and Kucoin. Similarly, Sogani said that the FTX meltdown had affected sentiment for all crypto tokens.
He said that the downfall had pushed back the crypto industry a few years. Meanwhile, there is still no crypto regulation in the country.
The Indian government plans on talking to G20 countries about crypto regulation in order to develop a regulatory framework. The government also gave the parliament a status update recently about its crypto bill.
As for the Reserve Bank of India (RBI), it has not changed its stance about banning crypto in the country and is working on its central bank digital currency (CBDC).
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