Zhao “CZ” Changpeng, the CEO of Binance Holdings Ltd., has said that India’s high taxes on transactions involving cryptocurrencies will likely “kill the industry” in that country.
Zhao, speaking on a panel at a fintech conference in Singapore on Thursday, said, “India has high tax which is probably going to kill the industry.”
After the Indian government this year implemented a tax package that has caused trading volumes to evaporate, the cryptocurrency industry has been hit with a barrage of dire predictions, and Zhao’s comments are just the latest in a long line of warnings. India has decided to put heavy taxes on capital gains and transactions instead of putting in place strict rules to regulate the industry.
Impact of the Taxation on Crypto Exchanges and Trading Volumes
In addition to the 30% flat tax on all crypto income that went into effect on April 1, India also imposed a 1% tax on the sale and transfer of crypto assets valued at more than 10,000 Indian rupees (roughly US$127) as of July 1.
The effects of this new taxation regime could be felt immediately in the country’s cryptocurrency exchanges.
Nomics.com reported that on July 1, trading volume at cryptocurrency exchange WazirX dropped by 63%, from US$14.53 million on June 30 to US$5.36 million.
On July 1, trading volume on CoinDCX dropped from $2.62 million on June 30 to $2.09 million, a decrease of about 20%.
Crebaco found that since April 1st, trading volumes at India’s major cryptocurrency exchanges have dropped by as much as 70%.
One of India’s earliest cryptocurrency exchanges, ZebPay, is looking abroad for expansion, according to CEO Avinash Shekhar, who also noted that the country’s 1% transaction tax “has to come down, otherwise things are not going to improve.”
Binance’s Battle With India’s Enforcement Directorate
As a result of its partnership with WazirX, the world’s largest cryptocurrency exchange, Binance, got into trouble with India’s Enforcement Directorate (ED), a regulatory body under the Ministry of Finance. While looking into allegations of money laundering by instant lending services in August of this year, the ED found that some of those businesses were using cryptocurrency exchanges to launder money.
WazirX and Binance engaged in a back-and-forth as a result of the investigation. While it appeared that Binance had acquired WazirX in November 2019, the company later stated that the regulatory bank process was never completed and the acquisition never took place. However, according to WazirX, Binance is responsible for keeping track of any international transactions that take place on its platform.
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