The CEO of Binance Chanpeng Zhao has disclosed that India’s outrageous tax rate on virtual assets has made the country difficult for crypto exchange platforms to thrive.
Zhao disclosed that the high tax rate on these assets, with the imposition of 1% on each transaction, has made the market nonviable for global market players, noting that it will limit the number of transactions.
He further stated that he is not the only one with such an opinion, as he has had discussions with several investors and startup founders who feel the same way.
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In his words,
“To be honest, I don’t think India is a very crypto-friendly environment, If you are going to tax 1% on each transaction there is not going to be that many transactions.
“A user could trade 50 times a day and they will lose like 70% of their money. There is not going to be any volume for an order book type of exchange. So we don’t see a viable business in India today.
“We just have to wait. We are in conversation with a number of industry associations and influential people and trying to put some logic there adding that charging a high tax on each transaction is resulting in lower tax accumulation broadly.
“We are trying to get this message across, but tax policies typically take a long time to change. Binance goes to countries where regulations are pro-crypto and pro-business. We don’t go to countries where we won’t have a sustainable business or any business, regardless of whether or not we go.”
Recall that on February 2022, the Indian government taxed all digital assets at a rate of 30% from cryptocurrencies, to Non-Fungible Tokens (NFTs), with no deductions or exemptions allowed. Also, losses incurred from crypto transactions cannot be set off against any other income.
While commenting on the high tax rate on virtual assets, a few business experts in the country stated that the government did so to discourage crypto transactions, as there were calls for a ban with the hope that a ban would pave the way for the country’s central bank to gain control over digital money.
However, on the flip side, some expressed delight that the government’s imposition of tax on virtual assets, implies that they have taken a progressive stance on cryptocurrencies, as a majority of people especially corporates have been sitting on the sidelines due to uncertainties, as they can now trade in crypto.
But in recent months, Indian banks have sent different signals to the industry players calling for the ban of cryptocurrencies.
The crypto market in the country has no doubt become unbearable, as American publicly traded company Coinbase, earlier this year halted trading service in the country due to “informal pressure” from the Reserve Bank of India
Also, local exchanges and other crypto firms have additionally seen a sharp decline in trading volume in recent months, in part because of the local taxation law.
India however remains one of the biggest markets in Asia for cryptocurrencies and one of the fastest-growing in the world. The country has 15 homegrown cryptocurrency exchange platforms.
Between 15 and 20 million people in India are estimated to own cryptocurrencies, with holdings totaling approximately $6 billion (€5.31 billion), industry figures indicate.
However, when speculation around the proposed cryptocurrency legislation began, prices of some of the most popular digital currencies like Bitcoin, Ethereum, and Tether plummeted by as much as 25% momentarily.