The daily trading volumes of Indian cryptocurrency exchanges have declined dramatically due to the transaction taxes entering into force in April. Tax experts consider the draft ITR form aims to include crypto companies formed abroad whose user base is in India.
Changpeng Zhao, the CEO of Binance, recently discussed the current anti-crypto policy in force in India. He reported that high tax rates hinder the emerging cryptocurrency business in the Asian country.
Zhao said that the high taxes on cryptocurrencies in force since April would probably kill the industry in India.
The Indian government introduced a 30% capital gains tax and a 1% transaction tax on cryptocurrency transactions. Since April, the daily trading volume on local cryptocurrency exchanges has dropped by up to 90%.
Since India has strengthened the regulatory environment, those platforms must comply with tighter KYC and security regulations.
In 2019, Binance announced it had acquired the Indian cryptocurrency exchange WazirX. However, Changpeng Zhao recently said he did not complete the deal with its CEO Nischal Shetty.
Due to the drop in its daily trading volumes, WazirX had to dismiss 40% of its employees in October.
India Seeks to Implement Taxes on Crypto Companies Formed Abroad
The Central Board of Direct Taxes (CBDT) of the government of India recently released a new joint ITR to replace previous ones. The draft document has fields requesting information about foreign companies whose user base is in the country.
Tax experts consider that this aims to include crypto and Web3 companies formed abroad but whose user base is India. A recent report from Nasscom indicates that India has around 450 cryptocurrency and Web3 startups, 60% registered in crypto-friendly jurisdictions with clearly-stated regulations.
India Tests Its CBDC to Control How Citizens Use Their Money
The Reserve Bank of India (RBI) recently started the first large-scale tests of the digital rupee, its CBDC. Several Indian financial institutions used it to settle almost 50 transactions in government bonds worth INR 170 million.
According to the Indian government, eight participated in the initial liquidation of the CBDC. These were the State Bank of India (SBI), Bank of Baroda, ICICI Bank, IDFC Bank, HDFC Bank, HSBC, Kotak Mahindra, and Yes Bank.
The digital rupee allows the Reserve bank of India to implement a new trading system in different national banks. Experts define CBDCs as digital fiat currencies issued by central banks. Therefore, they have value as legal tender in the countries that create them.
Initiatives like the digital rupee aim to have functions similar to fiat money without ceasing to be a control mechanism. In the case of China, the government issued a CBDC to reduce the use of decentralized cryptocurrencies like Bitcoin.
Taxes on cryptocurrencies in India and other countries seek to prevent citizens from investing in them. However, many people still believe in decentralized crypto assets like Bitcoin.
Meanwhile, Bitcoin is trading at around USD 20,609 and has accumulated a 1.6% over the last 24 hours. While its daily trading volume is above USD 377.00 billion, its market capitalization is about USD 395.65 billion, according to CoinGecko.
By Alexander Salazar
