India may not ease its crypto tax rules for at least two years, as suggested by a prominent digital asset exchange in the country. Last year, Indian authorities introduced a 1% TDS tax on cryptocurrency transactions, leading to a significant drop in trading activity on exchanges.
The tax increase discouraged market makers and high-frequency traders, causing trading volumes to plummet by 97% at some domestic exchanges in just 10 months.
“I don’t think we’ll see any immediate reduction in TDS since there have been no formal discussions between the industry and lawmakers specifically around it,” said Nischal Shetty, CEO of the WazirX exchange, in an interview.
India calls for a unified worldwide strategy for regulating cryptocurrencies and wants institutions like the International Monetary Fund to be involved in creating these rules.
For now, countries like Hong Kong, Dubai, and the European Union are ahead of the game, as they have already set up their own guidelines to safeguard investors and offer clarity to companies dealing with digital assets.
The head of the Indian crypto exchange, Shetty, is optimistic that India will take significant steps to make its crypto policy more favorable, but he didn’t specify what those steps might be.
CoinDCX CEO Sumit Gupta also stated that the company is actively advocating for the Indian government to reduce the TDS rate from 1% to 0.01%. However, no specific timeframe for this change was provided.
Some cryptocurrency entrepreneurs are taking proactive steps. For instance, Shetty has relocated to Dubai to work on his next project, Shardeum, a blockchain with aspirations to compete against established networks like Ethereum. CoinDCX is also expanding internationally, recently leading a funding round for BitOasis, a crypto exchange focused on the Middle East and North Africa.
Nevertheless, India’s traditional prominence as a hub for software and information technology engineering still attracts some digital asset firms, despite the challenges in the cryptocurrency space.
The Reserve Bank of India is also moving forward with the development of a digital version of the Indian rupee.
Also Read: India Leads in Crypto Adoption Despite Tax Challenges
