In 2022, India introduced strict crypto tax rules that many thought would kill the country’s growing interest in digital currencies. The government added a 30% tax on all crypto profits and a 1% tax deducted at source (TDS) on every transaction. These taxes were seen as harsh, especially since they created financial challenges for traders and made it harder for platforms to operate smoothly.
Many critics believed these policies would discourage people from using crypto, force activity underground, or drive investors to countries with more straightforward rules. But what happened next was surprising. Instead of shrinking, India’s crypto industry grew even more substantial.
Within a year, the country had adapted to these strict rules and emerged as a global leader in crypto use. By 2023, India ranked first on Chainalysis’ Global Crypto Adoption Index, showing how deeply engaged its people were with cryptocurrencies. And the momentum didn’t stop there. India kept its top spot in 2024, outperforming big markets like Nigeria, Indonesia, the U.S., and Vietnam.
This leaves us with an interesting question: how is crypto thriving in India, even with such strict tax rules?
Why Crypto Thrives in India Despite Harsh Tax Policies
As of November 2024, about 7% of the Indian population owned digital assets, up from 6.5% in 2023. Several factors are driving this rise in adoption, including the potential for high returns, the desire to hedge against economic challenges, and a natural curiosity about these assets.
Raj Karkara, the COO of ZebPay, India’s leading cryptocurrency exchange, credits it to the nation’s tech-savvy youth—over half of the country’s population are under 25. According to Karkara, this demographic has shown a keen interest in innovative financial tools, and cryptocurrency has captured their imagination as both a potential investment vehicle and a way to engage with cutting-edge technology.
For many young Indians, the shift towards cryptocurrency feels like a natural progression. Their familiarity with smartphones, digital payment platforms like UPI (Unified Payments Interface), and growing comfort with digital apps have created a fertile ground for crypto adoption. Other reasons behind their growing enthusiasm have pegged at curiosity, the lure of long-term returns, and a desire to diversify their investment portfolios.
The youths are not alone; the wealthy segment of India’s population has also embraced cryptocurrency. Many leverage the annual remittance limit of $250,000 to invest in assets like Bitcoin exchange-traded funds (ETFs). Vested Finance, a local investment platform focused on institutional and high-net worth individuals, reported over $5.3 million in Bitcoin ETF trading volumes in 2024, with 67% of transactions being buy orders.
The Role of Local Exchanges and Education
While stringent tax policies have posed challenges, local crypto exchanges have played a critical role in sustaining and expanding the market. Platforms like ZebPay, CoinDCX, and WazirX have simplified trading for millions of Indians, providing user-friendly interfaces and secure storage options.
Despite regulatory hurdles, these platforms have thrived. In March 2024, the top three exchanges collectively recorded over $584 million in trading volumes, up from $189.91 million in February. Between August and November, trading volumes saw impressive growth rates: CoinDCX surged by 429%, ZebPay by 240%, and Bitbns by 13%.
These platforms have gone beyond just facilitating transactions. Initiatives like CoinDCX’s Learn platform offer crypto lectures, guides, and courses, fostering greater awareness and education among users. Such efforts have been pivotal in demystifying blockchain technology and encouraging widespread adoption, even in the face of high taxes.
Will this Growth Continue?
India’s crypto market is already vibrant, but its full potential remains untapped. Industry leaders and analysts agree that comprehensive, well-defined regulations are critical for long-term growth. Tax reforms, in particular, could make crypto investments more attractive and encourage participation from a broader segment of the population.
Sumit Gupta, co-founder of CoinDCX, argue that the current tax structure limits the industry’s growth. Gupta believes that for India to truly become a global leader in crypto adoption, the government needs to implement a more comprehensive regulatory framework that addresses issues like high taxes and provides clearer rules for the industry.
The government seems to be gradually warming up to the industry. In May 2024, the Financial Intelligence Unit (FIU) approved licenses for major foreign exchanges like Binance and KuCoin after banning and restricting access to them due to their failure to comply with local Anti-Money Laundering (AML) regulations. Though the authorities have given no indication of easing the tax burdens, the current discussion about introducing a comprehensive framework for the sector is good news.
While challenges remain, including regulatory uncertainty and high taxes, India’s crypto future looks promising if the government continues to move toward more supportive policies. With the right reforms, the country is poised to not only thrive domestically but also play a pivotal role in shaping the future of the global crypto ecosystem.
Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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