$3.8 billion in cumulative volume moved overseas since India’s crypto taxes came into force

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While Indian crypto exchanges lost a significant portion of their trading volume after new taxes for the industry came into effect, the losses, so far, have been expressed as a percentage, with most estimates citing them as being greater than 90%, compared to the previous one. year.

Now, a new study has quantified the value of cumulative exchanges that shifted from Indian to foreign crypto exchanges after the new taxes came into effect.

CryptoPotato earlier reported that Indian traders were flocking to overseas markets after the country’s tax and regulatory environment became “unsustainable”.

$3.8 billion moved

Esya Centre, an Indian think tank on technology policy issues, in a report published on January 3, said that Rs. 32,000 crore ($3.85 billion) in cumulative trade volume has been transferred from Indian crypto exchanges to foreign competitors between February and October 2022.

The report, titled “Tax Architecture of Virtual Digital Assets in India: A Critical Review,” examines how new taxes for the national crypto market proposed in Union Budget 2022-23 on February 1 have impacted the overall activity of this sector.

He said Rs. 25,300 crore ($3.05 billion) of cumulative trade left Indian crypto exchanges in the six months to October 2022, i.e. since the new taxes came into effect. effective April 1.

Taking peer-to-peer trade into account, India’s total trade volume contribution to foreign trade is in the range of Rs. 80,000 crore ($9.67 billion), according to the Esya Center report.

“Tax treatment of VDAs in India is regressive compared to other countries with high adoption rates of VDAs, such as US, UK, South Africa, Vietnam, Philippines and Brazil,” he said.

volume drop

The decline in trading volume occurred in a gradual manner, according to the report, with the initial attack claiming 15% of trading volume in the first two months since Indian Finance Minister Nirmala Sitharaman’s tax change in her budget speech on February 1. , 2022.

A further 14% has been lost in the three months since April 2022, when the 30% tax on crypto gains went into effect. The high taxation was implemented without the provision to offset losses against profits.

The third and final blow came when a 1% transaction tax came into force on July 1, 2022, which eroded up to 81% of the trading volume of Indian stock exchanges, according to the report.

“Many Indian VDA users seem to be switching from domestic centralized VDA exchanges to foreign counterparts (about 17 lakh users changed over the analyzed period), a trend visible from February 2022 (i.e. say following the announcement of the Union’s budget)”, says the report. .

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