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New taxation regulations are expected to drive many consumers away from the market, leading to a sharp decline in cryptocurrency use in India in the second half of the year. There is growing regulatory uncertainty as a result of the Indian government’s decision to levy a 30% capital gains tax on cryptocurrency investments in the month of April and a tax deducted at source (TDS) of 1% on profits investors have made from cryptocurrency in the month of July. These developments threaten to undermine India’s position as a leading market for cryptocurrencies in Asia. India began taxing bitcoin earnings in April.

Heavy Taxes Drives Investors Away

According to Chainalysis’s Geography of Cryptocurrency research for 2022, India’s cryptocurrency industry is the most valued in the center, southern Asia, and Oceania (CSAO) region. India’s bitcoin investment market reached $172 billion between July 2017 and June 2018, well surpassing Thailand’s market worth of less than $150 billion, which placed it in second position. A blow has been dealt to exchanges since the release of Budget 2022 because of the high taxes on crypto investments in India and the lack of clarity on how these investments would be governed.

Major Indian Exchanges Bear the Brunt As Well

The market researcher Crebaco Global analyzed data from April to September 14 of this year and discovered that daily trading volumes on the two largest cryptocurrency exchanges in India, WazirX and CoinDCX, had considerably declined. WazirX has seen $1.3 million in daily average transactions this month, down from $23.2 million in April. This is a decrease of around 94% compared to the previous month’s total.

May saw $13.1 million in daily trade on CoinDCX, but by September 14 that figure had decreased to $1.4 million. WazirX’s quarterly trading averages plummeted 86% from the previous quarter to the current quarter, falling to $6.9m from $48.9m in the June quarter. CoinDCX’s quarterly trade plummeted to $6.3 million, a reduction of 79%, from the previous quarter’s total of $29.8 million. Although the third month of the year has not yet ended, there seems no improvement on the average daily trades on these major Indian exchanges.

Vikram Subburaj, CEO of domestic cryptocurrency exchange Giottus, claims that the present negative trend in the market is a manifestation of a domino effect that has been exacerbated by several other concerns.

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He continues by saying the implementation of the TDS on July 1 had a major impact on the financial stability of India’s cryptocurrency markets. Due to the TDS, this occurred. Since this tax has been levied on the margins of crypto trading, investors have been wary of making trades due to the lack of profitability they once enjoyed. This has had a major effect on exchange trade volumes, and the current state of the global economy isn’t helping matters.

India Crypto Market Ranking Losing Steam Quickly

Also reflecting this trend is research from Chainalysis, which found that by June of this year, India has fallen to the fourth largest cryptocurrency market worldwide, down from its second-place position in 2021. There was a dramatic reduction in cryptocurrency trade volumes after July 1st, and this trend has probably persisted.

This is seen by contrasting the monthly averages of daily trading volume in June and July on WazirX and CoinDCX. WazirX’s daily transactions in June totaled $9.7 million. But in July, the figure decreased to $3.3 million, a decrease of 66%.

Subburaj thinks it’s extremely unlikely that the cryptocurrency market will return in the near future, which means the value of the cryptocurrency market in India is probably going to go down in general.

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