The Number of People Using Binance Has Seen a Huge Spike Recently

The largest cryptocurrency exchange in the world has seen a recent uptick in the number of new user registrations. According to Bloomberg, this is a direct result of the government's decision in July to implement a tax deducted at source (TDS) of 1%.

In addition, the data presented in the Bloomberg study demonstrates that the number of app downloads increased by 429,000 during the month of August. In the year 2022, this particular statistic represents India's best performance ever recorded.

However, not every cryptocurrency exchange saw such a significant spike in trading volume. Since the new tax rate was implemented in India, the daily trading volume at a number of the country's cryptocurrency exchanges has dropped by more than 90%.

However, certain stakeholders in the industry voiced their dissatisfaction with the new tax, claiming that it lacked sufficient transparency for particular businesses.

Regarding the hike, Rohan Misra, the founder of SEBA India, pointed out that the new guidelines do not make everything perfectly obvious. The regulations were vague regarding whether or not the 1% TDA applies to trading in cryptocurrency derivatives in addition to spot transactions.

In addition, the 1% TDA is paid on top of a new tax of 30% on profits made from crypto tokens. In the same vein, traders cannot deduct their losses from their profits when they are involved in cryptocurrency trading.

It is not just companies based in India that offer services related to virtual assets that are experiencing a shrinking market. At the beginning of this year, there was a spike in the number of app downloads made by the FTX company, which is based in the United States. The number of customers using the company's product has decreased from 40,000 in January to 96,000 in July to 52,000 in August.

The number of downloads of the Coinbase app fell from 31,000 in June to 16,000 in August. Coinbase Global Inc.

In addition, the number of people who downloaded the Indian-based Wazirx app dropped to 92,000 in August, down significantly from the staggering 596,000 who did so at the beginning of the year.

A New Tax Will Create New Problems

The implementation of the 1% TDS has a negative impact on cryptocurrency activities in India. More importantly, the decision of the government to impose levies resulted in the crypto space suffering from a loss of momentum.

In addition, because this is the first cryptocurrency law in the country, investors and traders are uncertain about the goals it aims to accomplish. They envisioned helpful guidelines, not an immediate tax of 30 percent on any gains that were unrealized.

Some cryptocurrency exchanges are on the verge of collapse as a result of the new policy. Recently in India, there has been a precipitous drop in the number of transactions involving virtual assets. According to reports, investors are already considering trading on offshore markets in an effort to mitigate the negative effects of the high tax.

The move taken by the authority has a significant impact on the local providers of virtual asset services. The consensus holds that investors in cryptocurrencies can not be discouraged by taxation. On the other hand, the one percent tax functions similarly to a capital lock-in in that it stops investors from moving their funds.

This suggests that the issue at hand is not the TDS but rather the amount that the government is demanding. The user is restricted in the number of transactions they can perform with their available funds due to the tax rate.

As investors secure their holdings in cryptocurrency, they hold out hope that future regulations will be more crypto-friendly.

The only problem that people had with the new regulations was the taxes that were imposed on them. The government of India needs to seriously consider re-establishing the cryptocurrency market to its previous heights.