Crypto Unicorn Predicts India to Reduce Tax that Suppressed Trading
CoinDCX, a domestic exchange in India that was valued at over $2 billion before the implementation of a tax, suggests that the tax, which has severely impacted digital-asset trading in the country, should be reduced as it has proven to be ineffective.
The government imposed a 1 percent TDS tax on crypto transactions 16 months ago, saying the aim was to track buying and selling rather than raising revenue. But the fee diverted 95 percent of India’s trading volumes to foreign platforms that are difficult for local authorities to monitor, CoinDCX CEO Sumit Gupta said.
“The whole purpose of TDS was to track and trace transactions, but that has been lost,” Gupta said in an interview, adding that he expects the government to reduce the tax in time once it realizes the problem.
The charge led to the exit of market makers from Indian exchanges due to higher costs, reduced liquidity and inhibited trading. Local platforms remain in the dark, although Bitcoin’s recovery from the 2022 crypto route will help volumes elsewhere in the world.
Waiting for change
India has been calling for a globally coordinated approach to crypto regulation through multilateral institutions. Gupta said he expects more regulatory clarity by the end of 2025 after the 2024 general election.
A spokesperson for India’s finance ministry did not respond to emails and text messages seeking comment on the country’s crypto tax policy.
In April of last year, CoinDCX announced a $135 million funding round led by Pantera Capital and Steadview Capital Management LLC, valuing the company at $2.15 billion. India introduced 1% TDS from July 2022.
CoinDCX’s revenue is a third of pre-tax levels, Gupta said, adding that compliance costs have risen since India applied anti-money laundering legislation to the crypto industry.
The company reduced staff by 12% earlier in 2023 and now has around 550 employees. Operating income and bank cash will give CoinDCX a five-year “runway,” Gupta said.
Global leak
Jurisdictions such as Hong Kong, Dubai and the European Union have led India in adopting cryptographic frameworks to protect investors and provide clarity to digital asset companies, some of which are looking to expand beyond the United States after a crackdown by regulators there.
While Indian exchanges such as CoinDCX have withered, data from Chainalysis suggests that the nation continues to adopt crypto in other ways, such as through offshore trading or blockchain-based financial services such as lending. India received about $250 billion worth of crypto payments between June, second only to the US at over $1 trillion, according to Chainalysis.
CoinDCX, like other Indian digital asset exchanges, is looking to diversify revenue streams by looking abroad or expanding into different projects.
The company recently led a funding round in crypto platform BitOasis, which focused on countries such as the United Arab Emirates, Saudi Arabia, Bahrain and Kuwait. CoinDCX is also building a crypto wallet called Okto that allows coin holders to deepen decentralized finance.
“Okto is a growth area we’re investing in because we want to see how we can bring web3 to life,” Gupta said. The term “web3” refers to the vision of a decentralized Internet built around blockchains.
