Crypto trading volumes in India plummeted this week after the government imposed a long-feared 1% tax on all transactions.
Trading volumes in the country’s largest exchanges more than halved in the past few days, after the proposed tax went live from July 1.
The move highlights the Indian government’s latest attempt to dissuade the trade of crypto. Both the Reserve Bank and Finance Minister Nirmala Sitharaman have openly criticized the space, calling it speculation with no real value.
The 1% tax on all transactions also comes a few months after India introduced a 30% tax on all gains earned through crypto. The country is reportedly also considering even more taxes on the space, which already sits in its highest tax bracket.
India crypto volumes fall off a cliff
Data from aggregator nomics.com shows that trading volumes at WazirX and CoinDCX– two of India’s largest crypto exchanges- have slumped by over 75% since July 1.
WazirX’s daily volumes plummeted to $1.9 million on Saturday, down from 7.2 million on Monday. CoinDCX’s volumes dropped to $4.2 million from $14.6 million. At their peak, the two saw combined daily volumes of over $200 million in 2021.
While the imposition of the 30% capital gains tax had already dissuaded investment, the new 1% tax is set to dampen volumes even further. In addition to this, India is also considering a 28% goods and sales tax on crypto.
The measures are likely to keep crypto volumes depressed in the country, as the government drafts proper regulatory framework for crypto. As of 2021, India had a fast-growing population of crypto users, ranking the country among the fastest adopters of the space.
Global exchanges also see volumes decline
A broader decline in crypto trading volumes- amid a crash in prices- has also weighed on volumes in India.
Bigger players, such as Binance, Coinbase and FTX have also seen their volumes decline steadily through June. This happened as crypto market capitalization crashed below $1 trillion, prompting caution among traders.
A mix of rising inflation, interest rates, and fears of a recession have driven the crash, mirroring losses across most risk-driven assets.
But the crypto crash has already invited scrutiny from regulators in India. Reserve Bank Governor Shaktikanta Das warned of more volatility in the space, calling it a “clear danger.”
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