Has crypto lost its shine in India? Experts weigh in

Regulatory uncertainty, a new crypto tax regime and Reserve Bank of India voicing strong reservations are just some of the headwinds troubling the crypto industry in India. And with the UPI kerfuffle added to the mix, cryptocurrency exchanges are going through a liquidity crunch, adding to their overall woes and creating a long shadow over the crypto ecosystem. 

Also, this is not the only cause of concern for KYC compliant crypto exchanges in India. They are going through serious volume drops because of apprehension from retail investors about the asset class, with all the confusion and lack of clarity in this space.

Data curated by CREBACO suggests that trading volumes at Indian exchanges like WazirX and ZebPay has taken a hit post April 1, when the new crypto tax laws were implemented. 

On WazirX exchange, trading volumes dropped to 57.79 per cent as of April 27, from April 1. ZebPay witnessed a drop of 26.03 per cent in trading volumes as of April 27. And experts believe that this situation might not improve overnight. 

Sidharth Sogani, founder and CEO of CREBACO Global, told Business Today: "The overall enthusiasm and momentum of the crypto market in India has nearly died. The volumes are a clear indication of the sentiment. The way the volumes are going on at the moment, I don't see them revise until and unless there are better tax and compliant standards.” 

He does not see the situation improving despite bullish trends in the markets in the past month. “We were expecting the volume to revive but in spite of the attractive crypto market the volume has not come back.” 

Sharat Chandra, a crypto expert and vice president of research and strategy at EarthID, echoed similar views. He highlighted the regulatory squeeze which impacted payment gateways like MobiKwik and UPI for investing via KYC compliant crypto exchanges. 

“The regulatory uncertainty and an informal squeeze on payment gateways and banking support for crypto have resulted in lower trading figures for exchanges," Chandra said.

He also threw light on how other asset classes are becoming more attractive to customers. “Market uncertainty, too, has abetted the movement of funds out of riskier asset classes like crypto. Commodities like gold are attracting investor interest.” 

It is interesting to note that tax rates applicable to the asset class mentioned by Chandra are relatively lower than that applicable to cryptocurrencies. Short-term gains on precious metals like gold are taxed based on tax brackets and long-term gains are taxed at 20% with indexation benefits whereas cryptocurrency gains, irrespective of tax brackets or investment time period, are taxed at a flat 30 per cent since April 1. A 1 per cent TDS would also be applicable on all crypto transfers from July 1.

Despite these challenges, Chandra is optimistic about the growth of crypto in India. “These are challenging times, but builders in the crypto-ecosystem are putting their expertise into building new enabling tools for increasing the adoption of DAOs and Web3.0".