New Delhi, India

Warnings regarding a controversial new transaction tax from crypto exchanges in India are turning out to be accurate, with volumes evaporating after the levy came into effect, reported Bloomberg.

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Bloomberg cited data from CoinGecko, which revealed that soon after the 1% tax-deductible at source became effective as of July 1, three crypto exchanges, namely, ZebPay, WazirX, and CoinDCX, suffered declines ranging from 60% and 87% in the value of daily trading.

Also read | Crypto industry fears contagion as bitcoin slips under $20,000

As a result of plunging prices, unfavourable tax treatment, and difficulty in getting cash onto exchanges, the trading levels were already depressed previously, and the new tax contributed to the depression of the once-hot market. 

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For instance, as per CoinGecko data, $3.8 million worth of trading was done by Binance-backed WazirX on July 2, which is the day after the tax took effect, also known by the acronym TDS.

Watch | Why is the crypto market crashing?

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Trading worth the same amount could have been completed in close to two hours during the previous year.

WazirX Vice President Rajagopal Menon claimed that, on the one hand, long-term crypto holders are still buying and selling; however, market makers and high-frequency traders are no longer going to continue.

According to Menon, traders are currently doing more peer-to-peer trading and shifting to seemingly decentralized exchanges.

Also read | Crypto crash: Bitcoin last down 7.4 per cent at $18,915

In February, a tax regime for digital assets was introduced by the government consisting of the TDS and a flat 30% tax on income from crypto investments. 

The new tax regime is treating crypto differently from stocks and bonds, banning the offsetting of losses on such assets. 

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