Trading volumes across top cryptocurrency exchanges, including WazirX, CoinDCX, Unocoin and Bitbns, hit new lows having dropped by 35 per cent over the last 24 hours on Wednesday. With this, trading volumes have plunged to nearly 75 per cent till date, starting from April 1, when the new crypto tax was implemented, according to crypto research firm CREBACO Global.

The average drop in volumes over the last 10 days was around 65 per cent.

The situation is a double-whammy for cryptocurrency exchanges in India, with the new tax regime and wallet service provider, MobiKwik, withdrawing its services. According to sources, MobiKwik is one of the largest wallet service providers to crypto exchanges and also the most-used wallet among investors.

The government implemented 30 per cent tax on gains on virtual digital assets (VDA) from April 1.

Impact imminent

“These numbers are just accounting the top crypto exchanges in the country; smaller players might even be at the risk of running out of business if trading volumes continue to drop. Though trading volumes are surely not going up anytime soon, it may drop further around July 1, when the TDS comes into place, impacting liquidity players and retail investors,” Sidharth Sogani, Founder and CEO, CREBACO Global told BusinessLine.

He added, “While taxation was an issue, the situation worsened after Coinbase announced UPI-based payment for trading at their launch event in India recently. NPCI suddenly realised that exchanges were using their services and UPI, which should not be an issue either. UPI is just an interface connecting banks. MobiKwik’s backing out is also not right and pretty baseless. Legally, none of this is wrong, going by the Supreme Court order on cryptocurrencies. I believe, this will be a temporary issue.”

UPI interface

According to Sogani, Coinbase promoting UPI is a thing to be proud of. “Coinbase is a global company with a $100-billion valuation. Them entering India and promoting UPI as the primary onboarding mechanism, is something to be proud of,” he said.

A couple of days after NPCI’s statement on being ‘unaware’ of such transactions, Coinbase stopped UPI payment services for buying and selling cryptocurrencies in India all together.

Ashish Singhal, Co-founder and CEO, CoinSwitch, told BusinessLine, “While proceedings of conversations with all stakeholders are confidential and I am not at liberty to discuss the details, the current tax regime is detrimental for the industry. High-frequency traders provide liquidity in the crypto market, enabling efficient buying and selling of assets. These traders operate on extremely thin margins, and locking up their capital with high TDS will restrict their ability to operate, lowering market liquidity and eventually impacting retail investors, our core customer base at CoinSwitch.”

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