Between February 2022 and October 2022, Rs 32,000 crore was transferred from domestic to foreign exchange in crypto, as a result of the imposition a 30% tax on cryptocurrency earnings by Indian Government.
The Esya Centre in Delhi performed the research titled Virtual Digital Asset Tax Architecture in India. As of the halfway point in 2022, outsourcing has accounted for a total of Rs. 25,300 crores. There is concern that the country’s existing tax structure would cause a loss of 99.3 trillion USD in local exchange commerce over the next four years.
Shift from Indian Exchanges to Foreign
There was a 15% drop in trading volume between February and March of 2022 as investors shifted their cryptocurrency trading from Indian exchanges to foreign domestic centralized exchanges. Between April and June, they dropped by an additional 14%. Trading volume dropped by 80% between July and October.
On July 1, the 1% TDS provision will go into effect. After April 1, you can no longer use cryptocurrencies to cancel your losses.
The paper claimed that beginning in February 2022, centralized cryptocurrency exchanges outside India would become more popular than their Indian counterparts. According to the “strong evidence,” roughly 1.7 million Indian investors have moved their funds elsewhere due to the country’s crypto tax structure. Between July and September, there was a 16% drop in the downloads of local cryptocurrency exchange applications. The downloads of currency converters, however, rose.
Cryptocurrencies Collapsed in 2022
In the history of the cryptocurrency market, 2018 was the worst year on the planet. The market capitalization of all companies dropped from $2 trillion in 2021 to $819 billion on January 4, 2023, a drop of 55%. This year was marked by catastrophic failures, most notably the FTX exchange. Bitcoin, the cryptocurrency with the greatest market cap, has seen its value drop by 70% from its all-time high in November 2021.