The Indian government is launching a cryptocurrency awareness campaign aimed at educating investors about the legalities of crypto in India while highlighting the risks associated with investing in digital assets. While the government entertains itself with awareness campaigns, a report was recently released that explained the enormous impact that India’s 30% crypto tax has had on local exchanges.
India’s Crypto Awareness Campaign
The government of India is reportedly launching an initiative aimed at raising awareness of cryptocurrencies whilst educating investors about the legal status of crypto in India. The awareness campaign will also highlight the risks of investing in crypto assets. The first-of-its-kind campaign will be overseen by the Investor Protection and Education Fund Authority – a government body controlled by the Ministry of Corporate Affairs. According to a government official quoted by Bitcoin.com:
The campaign will highlight that cryptocurrencies are not legal in India and there are also deep risks involved in such assets. Any investment where the people are being promised lucrative and assured returns, there is an element of high risk.
India’s Stance on Cryptocurrencies
India has been firm on its stance against cryptocurrencies and the Indian central Bank, the Reserve Bank of India (RBI) has been advocating a complete ban on all crypto, warning of their potential to destabilise India’s monetary and fiscal stability. Most recently, the Indian central bank governor Shaktikanta Das, said that cryptocurrencies should be banned, and if allowed to grow, might be the cause of the next financial crisis.
The government is preparing to regulate cryptocurrencies, but Das followed suit with the opinion of other central bankers and leaders of global financial bodies by saying that crypto had no underlying value and posed a risk for macroeconomic and financial stability. Das sternly commented:
Mark my words, next financial crisis will come from private cryptocurrencies…After FTX episode, don’t think we need to say anything more on crypto.
The governor has urged that cryptocurrencies be banned:
It should be prohibited because if it is allowed to grow … say it’s regulated and allowed to grow … please mark my words that the next financial crisis will come from private cryptocurrencies.
India’s Harsh Crypto Tax is Forcing Traders to Foreign Exchanges
When the new Indian tax law came into effect on March 31, 2022, it obligated citizens trading in crypto to pay a capital gains tax of 30% on their crypto. As if that is not harsh enough, traders have also been required to pay a 1% tax deducted at source (TDS) on every single transaction. According to TechCrunch, which cites a new report by Esya, these almost draconian tax rates have finally caught up to local cryptocurrency exchanges and have resulted in local exchanges “ceding the lion’s share of the market to those operated by foreign players.”
Data from Delhi-based think tank Esya, report that Binance, Coinbase, and other foreign exchanges command 67.6% of the cryptocurrency market share in India as of October 2022 – up from 50% in November 2021. Esya’s report says that during the period between February 2022, when the country’s new tax policy was unveiled, and October 2022, a whopping $3.8 billion of trading volume shifted from domestic centralised exchanges to foreign-operated exchanges. Locally operated exchanges including WazirX, CoinSwitch, and CoinDCX lost 81% of their trading volume in the time between July and October 2022. The major loss by locally operated exchanges is attributed to the fact that traders argue that by moving their assets to foreign exchanges will mask their activities from local authorities. Many foreign exchanges such as KuCoin allow trading, within certain capital limits, without requiring KYC details.
Esya concludes its report by urging the Indian government to re-evaluate its crypto tax policy.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
