After being so apprehensive and reluctant to adopt cryptocurrency, the Indian government has finally decided to open up. Though there is still confusion about the future of cryptocurrency, RBI’s latest announcements have signaled to crypto experts that crypto is one step closer to being legal in the country. Moreover, crypto assets are prevalent among younger investors who have a better appetite for risk. Also, these are the ones enthusiastic about acquiring adequate financial education to reap the benefits of the ever-changing landscape of digital finance. Interestingly, there are around 20 million Indians are dealing in cryptocurrency.
Effects of restrictions and recessive trends
However, India’s restrictive policies and the role of the Reserve Bank of India (RBI) have led to a downturn in crypto exchanges. The changes in the Indian crypto market are evident from the drop of 95% in the value of WazirX, a growing cryptocurrency exchange. The results of these restrictions and taxes are affecting crypto exchanges and investors. The hefty amount of taxes has forced investors to withdraw their capital, as no one is ready to stake their sum for almost no gains. The drop-in value of rising crypto exchanges like WazirX results from these changes.
The drop in the value of WazirX
The report stated that crypto exchanges and companies are planning layoffs amid the crashing market which resulted from the panic created by the free-fall situation in the overall market. The situation got worse as the investors bearing low prices had to carry the burden of taxes as well.
Moreover, WazirX showed exceptional progress and proved to be one of the fastest-growing exchanges in India. The dramatic change happened after the loss of value in October 2021 as the Indian government-imposed taxes.
The vice-chairman of WazirX, Rajagopalan Menon, said that they saw a speedy rise in the previous year as they saw record expansion in the past seven months. They had even expanded their team of programmers from six to fifty, which only grew further. It was after October when taxes were imposed, and the exchange saw a decline of 95% in value. However, they plan to retain their employees.
India is not the only victim of crypto winter. Various crypto exchanges across the globe have seen a decline in profits like Coinbase, Robinhood, Bitso, Bybit, and many.
India imposes new taxes on cryptocurrency
As of now, India is taxing crypto trades with 30% on the obtained revenues, not to mention a new tax that will come into effect on July 1, which will deduct 1% on all transfers made through cryptocurrencies. This is why the country is no longer considered good for the crypto industry as it was a few months ago when the sector grew 600%, according to Chainalysis.
However, RBI which is the country’s central bank is working on running an experimental project in conjunction with other state-owned banks and international companies such as IBM to implement blockchain technology to fight against the deceptive activities that stalk the country’s banking system.
Despite crypto turbulences in the overall market, the RBI is determined to improve the current situation and remain optimistic. Seems acceptance of the digital currency by the Indian state is a prudent move, considering the pace at which the crypto financial system is expanding itself.