Binance wins big as crypto traders flee Indian exchanges to escape taxes
Binance Holdings Ltd.’s billionaire CEO Changpeng Zhao is tightening his grip on India’s cryptocurrency trading market as a result of a major tax change.
Downloads of Binance’s app in India jumped to 429,000 in August, the highest this year and nearly tripled that of runner-up CoinDCX, data from market intelligence firm Sensor Tower showed. Only Binance among the top exchanges achieved higher downloads in India compared to July.
The operator of the world’s largest crypto exchange stands out in a market where rivals struggle with high taxes and the difficulty of moving money in and out of trading venues. Daily volumes on key India-based platforms are down over 90% since a 1% tax on crypto transactions took effect in July.
While Zhao has outflanked competitors with low fees, varied offerings and a popular peer-to-peer marketplace that enables easier movement between tokens and cash, another factor is the contrast in the way foreign exchanges and those with Indian roots handle the transaction tax imposed on domestic residents.
Platforms of Indian origin have started deducting the fee, but many foreign peers such as Binance and FTX have not, prompting investors to switch to the latter, according to several users of the apps who asked to remain anonymous given the nature of the case to the tax legislation. Traders may see a loophole in lax enforcement and a gray area as to whether the law applies to more complex transactions.
“The recent tax regulations are not explicitly clear on whether the 1% tax deducted at source extends to crypto derivative transactions involving futures, as it does to crypto spot transactions,” said Rohan Misra, managing director of SEBA India, a subsidiary of Swiss-based SEBA Bank AG.
Binance is “currently monitoring the situation and will make further announcements in due course,” a spokesperson said in response to questions about whether it had begun collecting the fee. FTX declined to comment, and India’s finance ministry did not respond to emails seeking comment.
Binance’s gains come amid a rare public spat with WazirX, its partner in India, which saw Zhao encourage WazirX customers to defect to Binance. WazirX’s monthly downloads fell to 92,000 in August from about 596,000 in January.
The 1% tax known colloquially as TDS came on top of a new 30% tax on gains from the transfer of crypto assets, which is steeper than in many other jurisdictions such as the US and UK.
Rules introduced this year also prevent crypto trading losses from being offset against income. In addition, limited support from the banking system makes it difficult to fund accounts or switch from tokens to fiat currency.
The wider embrace of the Binance app contrasts with the decline of most other players. CoinDCX downloads, for example, shrank to 163,000 in August from 2.2 million in January, Sensor Tower data shows.
Billionaire Sam Bankman-Fried’s FTX saw nearly 96,000 downloads in India in July and 52,000 in August from around 40,000 in January.
San Francisco-based Coinbase Global Inc. has said it complies with tax rules for crypto transactions. It saw downloads in India fall to 16,000 in August from nearly 31,000 in June.
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