India’s Interest In Crypto Declining After Budget 2022: Google Trends Search Data
On February 1, the day before the budget, searches for the phrase "cryptocurrency" or “India Crypto” reached an all-time high, with a reading of 100. On most days since then, the readings have been in the 17-9 area on average.
Not just that, the states from which this data comes are also limited now, suggesting that the trend is not picking up interest all over the nation. On Budget Day, the reading for the search phrase "crypto" was likewise at its highest, at 100. Since then, it's been in the 36-13 range, with Chandigarh leading the way, followed by Daman and Diu, Goa, Haryana, Sikkim, Delhi, Tripura, Maharashtra, Manipur, and Jammu & Kashmir.
Crypto Volume Has Dropped Due to Tax Implications
Trading volume on key crypto exchanges decreased by as much as 90% after just a few weeks of the new crypto tax law taking effect, as projected. Traders are either shifting their cash away from centralized crypto exchanges or opting for a holding strategy over trading, according to the fall in trading activity.
In an interview with CNBCTV18, Nischal Shetty, the CEO of WazirX said that the tax implications on crypto are a matter of great concern for the future of the market here. He said:
“The confusion around taxes is probably a bigger issue right now; the future of the TDS and everything coming in. Overall, volumes-wise, there has been a dip of 30 to 40% in the last, let us say, 30 to 45 days in India. India has taken a steeper drop in trading volumes, mostly because of these recent changes. But even globally, there's been some dip in crypto due to the market conditions.”
The financial markets are still adjusting to the new levies and the industry is hoping for more clarification on the TDS, and possibly a reduction in the TDS from 1% to 0.01%, which would be extremely beneficial to the sector, Shetty said. There is a perception among the participants that they have a better understanding of the taxation system.
Indian crypto exchanges are also unable to find a third-party payment processor.
This, paired with the country's strict tax policy, the 30% tax is prompting crypto platforms to contemplate relocating to more crypto-friendly jurisdictions, with Dubai being a top contender.
Nirmala Sitharaman’s Statement on Crypto Tax
The government received a lot of backlash from the crypto community in India. However, taxing revenue from cryptos and other virtual digital assets, according to Finance Minister Nirmala Sitharaman, should be considered as a way to check the source and trail, not to legitimize them. She said:
“We did announce that on the income that was generated out of the transactions of these crypto-assets will be taxed at 30% and over and above that, there is a 1% tax deduction at the source which is also imposed on every transaction. So through that, we will be able to know who’s buying and who’s selling it.”
The Finance Minister also made a strong argument for worldwide cryptocurrency regulation to combat the threats of money laundering and terrorist financing. Sitharaman said at a high-level panel discussion hosted by the International Monetary Fund (IMF) that regulation would be difficult as long as the non-governmental activity of crypto assets was conducted through unhosted wallets.
She also stated that, as announced in the Budget 2022, the Reserve Bank of India (RBI) is working on developing India's digital currency. So the crypto community is eagerly waiting to see what that brings to the table.
