The Indian cryptocurrency industry started to bloom early in 2021 when the authorities lifted the banking bans. The government imposed one percent Tax Deducted at Source (TDS) on virtual digital asset (VDA) transfers exceeding Rs 10,000 (approx. $125) during the same period. The authorities have collected Rs 158 crore (approx. $19 million) in TDS on the transfer of VDAs till March 20. This trend of regulation has not come without consequence since India’s 450 Web 3 startups are now being registered outside the country, with 60% of those registered outside of India, as per a Nasscom study. The industry has even nicknamed India “Crypto Exodus,” with those in the industry leaving India’s unfriendly regulations.

At the end of the financial year in March, India had an estimated 150 million cryptocurrency users, a figure which might rise to 11% of locals having experimented with digital asset trading by the end of this year.India’s high taxes, coupled with the PMLA, caused a shift in focus to other countries, such as UAE and Singapore, that were friendlier to the market and regulations. This was recognized during the G20 Forum with crypto regulations being discussed among the top fintechs of the world.

It is estimated that by the end of 2023 the G20 will have established a certain set of regulations that would provide the framework for this rapidly growing industry. In the meantime, crypto users and companies in India need to remain responsible, being diligent in abiding and paying their taxes while they wait for a more favorable environment. Only then India’s crypto industry and the country’s growth can reaccelerate and reach new heights.



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