The TDS rule reduces the volumes on crypto sites
Volumes on WazirX fell the most by 82%, according to data obtained from the crypto-research and consulting company Crebaco. The decline was almost 70% on CoinDCX and 76% on ZebPay.
While crypto exchanges say it is too early to know the actual impact of withholding tax (TDS) as trading volumes are usually lower over the weekend, some experts said trading is likely to remain under pressure.
“At the moment, it is still too early to predict the consequences of TDS. We will be in a better position to understand this by the second week of July,” said Rajagopal Menon, vice president of WazirX. of the industry as investors shift to hold, and there may be a further decline as traders see their capital locked up while trading on KYC-compliant Indian stock exchanges, “he added.
The recently introduced 1% TDS on the sale and transfer of virtual digital assets will force day traders to move out of Indian stock exchanges and re-evaluate their gaming books, senior executives in the crypto industry told ET.
Last year, sustained investor interest led to a meteoric increase in volumes on crypto exchanges. According to industry estimates, the five to six Indian crypto platforms had a total trading volume of $ 70-100 billion in 2021, with WazirX alone handling around $ 43 billion, ET reported on April 1.
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Impact on traders
Industry insiders expect that the decline in trading activity will be further exacerbated by the bear market due to ongoing global macroeconomic conditions.
Meanwhile, some day traders told ET that the gray market would continue to flourish in this scenario, and they would try different models to see if it would be profitable to stay on Indian stock exchanges.
Shounak Shetty, 28, from Mumbai said his daily assets under management were down from Rs 14 crore in March to Rs 50 lakh now.
“I would say that from March 31 I stopped most of my operations, but from Friday I have cut it further. This fiscal year I will test on small accounts to see if any kind of model is still profitable,” said Shetty , which is a crypto portfolio manager. “Like other traders, I try to find out if it is possible to stay profitable on Indian stock exchanges. This will lead to another brain drain of professional traders to other countries like Dubai which is more inviting,” said Shetty.
Another Mumbai trader, who asked for anonymity, said: “Regardless of the small trade I made on Indian stock exchanges, I will quit now.”
The crypto peer-to-peer market with thousands of direct buyers and sellers in India will trade even more on decentralized exchanges or international exchanges. Until government regulation becomes less crypto-friendly and user-friendly, these small gray markets will continue to grow, unfortunately, he said.
Impact on stock exchanges
Senior exchange managers ET spoke to said that the new TDS rule will lead to consolidation in volumes.
“On the consumer side, they will look at how different platforms implement it and what will be most beneficial to them,” said Sathvik Vishwanath, co-founder of Unocoin. He said that both retail investors and stock exchanges were in a bit of a panic mode.
“Trading platforms want to make sure they have implemented their processes correctly to subtract from TDS as each platform has a different model. Everyone wants to look carefully at whether everything is according to plan,” Vishwanath said.
While some exchanges have enough coffers to survive the current market, a few are also considering diversifying into other areas or exploring international markets. Crypto trading platform Coinswitch Kuber is expected to launch its first financial services product by this year.
The industry, which has been hammered by new tax laws introduced under the union’s budget this year, has already seen volumes plummet by 40-80% in June compared to March, according to Crebaco. Charging a few on trading activity is the main source of income for stock exchanges.
