During the Global fintech panel that took place in Singapore, the CEO of Binance, Zhao Changpeng, stated that the high tax rates on cryptocurrency will result in the death of the business in India. These emotions have arisen as a result of the Indian government's decision to implement a tax scheme that has had a profoundly negative impact on the cryptocurrency business in the nation.
During the hearing for the 2022 budget, India's Finance Minister Sitharaman Nirmala declared a tax rate on cryptocurrency transactions of 30 percent. This is an important development. In addition, the government of India issued a decree that all cryptocurrency transactions are eligible for an additional 1% tax exemption.
According to reports, one of the largest cryptocurrency exchanges in India, WazirX, has reported a reduction in daily transactions of almost 70% as a direct result of the government's imposition of high taxes. The typical price of a transaction was $1 million by October 2022, which was a significant decrease from earlier years. When compared to the times before the tax edict, this represents a reduction of 90%. According to nomicsdata, the value of transactions conducted through Zebpay, another prominent exchange in India, dropped from $122 million in October 2021 to $1.26 million at the present time.
The Chief Executive Officer of Zebpay, Avinash Shekhar, recommended that the government reduce the imposed tax rates as well as the 1% transaction tax. After expanding the cryptocurrency business to Singapore and Dubai, he made this statement.
He pointed out that the high crypto tax rates in India had a negative impact on the brokers, including WazirX, which had to let go of about 45 percent of its workforce. Shekhar claims that these rules have had an impact on Zebpay as well, and as a result, the company has reduced employee salaries by up to 6%.
Regarding Cryptocurrency Regulations in India
Layer 1 blockchain companies like Ethereum and Binance have set up shop in India in the hopes of capturing a significant portion of the country's market. In addition, India is one of the countries with the highest population, with over one billion people according to the most recent census. Despite this, the nation's policymakers have been eager to regulate the cryptocurrency industry in order to safeguard investors from being taken advantage of.
The first cryptocurrency exchange in India was established in 2013, exactly four years after Bitcoin was originally made available to the public. Because the Reserve Bank of India believed that virtual currencies should not be treated as legal cash, it passed a regulation that outlawed cryptocurrencies. Four years were spent by the government discussing the issue, but no resolution was ever reached. In 2017, the Reserve Bank of India (RBI) and the Ministry of Finance collaborated to establish a committee to monitor cryptocurrencies.
Due to the growth of crypto-related enterprises in the country in 2019, the Reserve Bank of India (RBI) decided to implement a ban. Later on, in 2020, the Supreme Court of India ruled that the order issued by the RBI that restricted cryptocurrency trade in the country was unlawful. This led to the relaxation of the ban on cryptocurrency exchange in the country.
The introduction of a new digital currency in India is scheduled for January 2021, according to an announcement made by the administration. In addition, back in November, the government announced that it would not be banning cryptocurrencies but rather regulating them instead.