Crypto Traded Volume Drops 70% as Virtual Digital Asset Tax Takes Effect

Reports say volumes on WazirX fell 82%, 76% on ZebPay, and 70% on CoinDCX

The Union government’s rule requiring withholding tax on every cryptocurrency transaction came into effect on July 1, and trading volume for major cryptos in the country has shrunk by almost 70% in the past. during the first three days of July, according to reports.

CoinDCX, WazirX, and ZebPay saw a significant drop in trading volume between July 1 and July 3, data shared on Nomics suggests.

In her Union Budget 2022 speech, Finance Minister Nirmala Sitharaman introduced a new tax for Virtual Digital Assets (VDAs) which taxes gains from the transfer of such assets at 30% (plus surcharge and applicable taxes) from fiscal year 2022-2023.

Experts say it may be too early to say that the drop in traded volume is due to this new tax. But the results were there. Volumes on WazirX fell 82%, 76% on ZebPay and 70% on CoinDCX, noted crypto research and advisory firm Crebaco.

In recent weeks, cryptocurrencies, which are not backed by any underlying asset, have experienced massive volatility amid global uncertainties.

Reserve Bank Governor Shaktikanta Das recently described cryptocurrencies as an “obvious danger” and said anything that derives value on the basis of pretending, without any underlying conditions, is not is just speculation under a fancy name.

The government is in the process of finalizing a consultation document on cryptocurrencies after collecting input from various stakeholders and institutions.

Regarding the decline in traded volume and the possible impact of TDS, crypto behemoths say they would rather take a cautious approach instead of jumping to any conclusions. Rajagopal Menon, vice president of WazirX, said the impact of the new tax should be clear by the second week of July.

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It is also widely believed that the current stock market decline will further impact the crypto exchange. Some media reports, however, suggest that the gray market would thrive despite the tax.

A crypto trader said that amidst the uncertainty, he will see if one type of pattern is still profitable in Indian exchanges or moves overseas. Crypto traders are clearly skeptical of government intervention and are hoping for more crypto-friendly and user-friendly regulations in the months and years to come.

Crypto exchanges believe that retail investors as well as exchanges panicked over the new regulations.