India’s crypto tax could cause CEXs to lose $1.2T trading volume by 2026

India has lost $3.85 billion in trading volume to foreign counterparts due to a 30% crypto tax.

India’s crypto tax could cause CEXs to lose $1.2T trading volume by 2026

Indian crypto exchange lost approx 97.1% of its trading volume between January and October 2022. 

Indian crypto exchange giant WazirXCoinDCX, and Zebpay the study bears it provides the first monetary estimate of the impact of India's crypto tax. 

As per the research, $4.74 billion in January trading volume on the Indian exchange tanked to $137.6 million by October 2022.

Around $3.85 billion trading volume fied from the Indian exchange between February and October.

India's Centralized exchange (CEXs) came after the tax was implemented Indian CEXs lost another 14% in trading volume between April and June.

The majority of trading volume loss after the government levied a 12% tax from July 1, Indian exchanges lost 81% of their trading volume in 4 months.

Many Indians denounced the steep 30% tax rate and most migrated to foreign crypto exchanges in a bid to escape the 1% tax, around 1.7 million Indian users switched to foreign exchange. 

According to a WazirX and Zebpay survey of 9,500 respondents who had actively traded between January 1 and April 15, 2022, 24% of Indian investors had said they were considering a move to foreign exchange as well the survey found that the tax had impacted the trading frequency of 83% of Indian traders.

Resorting to differentiated tax rates for short and long-term gains could increase tax collection and possibly curb outflow. 

If the government incorporates these changes the study estimated that Indian exchange trading volume will return to pre-tax announcement levels within a quarter also domestic exchanges will receive 50.5% traction from Indian users on average returning to pretax normal. 

Furthermore, the study noted the high volume of peer-to-peer trades indicates a need for regulatory oversight and a specific licensing regime for exchange the report also suggested the Indian government strengthen international collaboration and learn from international best practices on platforms like G20.

Related: Indian Government Launching Crypto Awareness Campaign