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