Indian crypto exchange trade down by Rs 32k cr since 30% tax kicked in

business-standard.com:

Following the announcement of a 30 per cent tax on the income from crypto assets and one per cent tax deducted at source in the Budget 2022, cumulative trade volume worth Rs 32,000 crore shifted from Indian crypto exchanges to foreign ones between February to October, a study showed on Wednesday.

The current tax architecture may lead to a loss of approximately Rs 99.3 trillion of local exchange trade volume in the next four years, the "Virtual Digital Asset Tax Architecture in India" study released by Delhi-based think-tank The Esya Centre said.

Of Rs 32,000 crore, Rs 25,300 crore were offshored in the first six months of 2022-23 (FY23).

"60.8 per cent of the fall in the volumes of Indian centralised crypto exchanges are due to domestic market conditions or the tax architecture in India during Feb-Oct 2022, and the conditions intrinsic to these exchanges," it added.

In February and March 2022, domestic centralised crypto exchanges lost 15 per cent of their total trading volumes. Between April and June, they lost another 14 per cent, and 81 per cent of all trading volume was lost between July and October. The 1 per cent TDS provision came into effect on July 1. From April 1, offsetting losses in crypto have also been disallowed.

"We find that the main (unintended) impact of the policy is the offshoring of domestic business and liquidity to foreign exchanges. Therefore, we anticipate a commensurately large negative impact on tax revenues, as well as a decrease in transaction traceability – which defeats the two central goals of the extant policy architecture," the study said.

From February 2022, the study said there was "clear evidence" of foreign centralised crypto exchanges gaining traction at the cost of Indian