Crypto adoption is not slowed down by India’s unfavourable tax laws and regulatory climate.
India has been a leader in the global adoption of crypto for two consecutive years, and millions of Indians are trading in digital assets.
In spite of the tough government stance, trade volumes are surging, especially in small cities. Economic pressures, changes in investment behavior, and global development are driving the rapid adoption.
The numbers suggest that India is not as far behind the rest of the world in adopting crypto.
India’s crypto trading industry is growing despite high taxes
India’s crypto-tax policy is one of the strictest in the world.
The tax rate on profits is 30% and each transaction has a tax of 1% deducted at the source.
New penalties will be introduced in 2025. These include fines up to 70% of the value of undeclared cryptocurrency holdings.
The measures are meant to deter trading but they’ve done very little to slow the market.
CoinGecko reports that the crypto trading volume on India’s four top exchanges has doubled to $1.9 billion in the fourth quarter of 2024.
Many new traders are coming to the market, particularly from cities outside of metro areas.
Many young Indians are looking for alternative sources of income as the job market stagnates and wages decline.
Digital assets have become more attractive as people look for financial opportunities beyond traditional markets. However, many are unaware of their high cost.
The smaller cities will lead the way
India’s cryptocurrency activity, once dominated by major metros such as Mumbai and Delhi is now increasing fastest in smaller towns.
According to CoinSwitch, Jaipur and Lucknow will be among the 10 top crypto trading centres in 2024.
It is clear that smaller cities have a greater desire to earn and invest.
The traditional employment opportunities in India haven’t kept up with the economic growth.
Crypto is a popular choice for young Indians, with 40% of them under 25 years old.
Crypto trading is a popular alternative to stock derivatives, as regulations are tightening.
Also, local crypto-education academies have gained popularity in training individuals on digital asset trading.
The grassroots financial movement in the United States is changing.
Are global events influencing India?
India is now reevaluating its crypto policies in response to the global development.
Election of Donald Trump as US president in 2024 will force a shift in crypto regulations.
Trump’s more favorable stance towards digital assets has led to renewed confidence around the world in this sector.
Indian authorities have delayed their decision to publish a paper on crypto regulation in 2024.
Ajay Ajay, Economic Affairs secretary acknowledged that India could not take a unilateral position on cryptocurrency as it was a global asset.
The Reserve Bank of India has expressed concern over the rapid growth of private cryptocurrency. RBI remains opposed to the use of private crypto currencies.
Central bank officials have repeatedly stated that crypto-currency usage can pose macroeconomic threats, such as financial instability and capital outflows.
The RBI’s December 2024 Financial Stability Report highlighted that stablecoins and crypto assets could lead to financial instabilities by disrupting monetary policies.
While the RBI continues to oppose the move, the Government is rethinking their approach.
It is not certain, but it could be that the policy will change in the coming years.
The exchanges have tried to return
Many Indian traders have switched to the foreign exchange markets to avoid paying the TDS of 1%.
The Financial Intelligence Unit has taken action against unregistered sites.
Binance has been fined $ 2.25 million in June 2024 for not complying with Indian regulations.
KuCoin and other exchanges were penalized as well.
Recently, however, the major exchanges have been trying to enter India’s market.
Coinbase has been in discussions with Indian regulators about a potential return.
It all boils down to regulation clarity.
The domestic exchanges may see a revival if the government adopts a structured approach.
Risks and road ahead
A report from Chainalysis projects that India’s cryptocurrency market will grow to $1.5 billion in 2035.
This is a growth rate of 18% per year.
The digital asset market in India has a significant potential, despite current regulatory uncertainties.
Security is a concern. The 2024 WazirX Hack, which resulted in a loss of $235 million, highlights this.
The lack of protection for consumers in India’s cryptocurrency space was exposed by the freezing of withdrawals.
India, unlike the US or EU where investor protection regulations are constantly evolving, has not yet introduced similar safeguards.
The question also arises of the long-term policy of government. Although crypto adoption is on the rise, regulatory uncertainties and high taxes are still a challenge.
The market might expand if the government adopts a more positive stance.
Investors may move to offshore platforms if restrictions are tightened.
As of now, India’s financial system is dominated by crypto.
A market which continues to surprise is shaped by the younger population of this country, global influence and economic changes.
India’s economy is deeply rooted in crypto, whether it embraces the digital asset or pushes back.
The government is against crypto, but Indians embrace it. This post may change as new information becomes available
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