India’s largest cryptocurrency exchange faces a brutal market winter due to unfriendly local regulations.
Plunging prices, looming cryptocurrency tax plans and the inability of customers to transfer funds to exchanges have hampered Indian exchanges’ expansion plans.
WazirX, founded in March 2018 by Indian computer scientist Nischal Chetty, said it focused only on hiring key employees and cut all other expenses in the current bear market. If existing employees resign, the remaining employees need to take on more work. Positions were filled almost immediately ahead of the current crypto winter.
Competitors Unocoin and BuyUcoin are also closely following Coinbase Global in the US, Crypto.com in Singapore and, more recently, Bitpanda in Austria. UnoCoin’s CEO told Bloomberg that the company is cutting costs and is only hiring out of necessity like many others in the industry.
Ominous tax demands weigh on investors
Not long ago, cryptocurrencies were booming in India, with full-page advertisements in newspapers showing gushing Indian celebrities talking about the merits of investing in cryptocurrencies. But now, Indian exchanges face the additional threat of drying up domestic liquidity due to multiple government-imposed taxes.
In a bid to legitimize the industry, Finance Minister Nirmala Sitharaman has dealt a blow to many cryptocurrency traders when she proposed a 30 percent tax on all cryptocurrency profits in her budget speech for the fiscal year starting in April 2022.
An additional 1% tax will be levied at source on all cryptocurrency transfers above a certain threshold, while parliament is currently weighing the possibility of increasing VAT.
Additionally, exchanges like Coinbase fell victim to the suspension of the joint payment interface in mid-April this year, preventing customers from topping up their exchange accounts with cash.
Cryptocurrency has a future as a commodity, says WazirX CEO
Prime Minister Narendra Modi often sees technology and innovation as the pillars for realizing his national vision. This pioneering approach can be seen in India’s leadership in digital payments in 2016 with the launch of a joint payment interface. The central bank announced a phased approach to central bank digital currencies in May, but has yet to approve a crypto regulatory framework.
After the Supreme Court overturned a blanket crypto ban in March 2020, crypto enthusiasts argued that the Indian government’s stance on crypto stemmed from its view of private cryptocurrencies as a threat to its national currency and a tool for money laundering and illicit activities.
In April last year, Shetty told the Financial Times that he believed the government statement pointed to the future of cryptocurrencies in India as a commodity, not a payment method.
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