As if the introduction of a 30% tax on crypto transactions was not enough, regulatory uncertainty over digital assets has proven to be another stumbling block for India’s booming crypto economy.
Coinbase, which had big plans for expansion in India, was forced to halt services days after launching services on the subcontinent. The US-based crypto bourse recently announced its debut in India with support from Unified Payments Interface (UPI), a government-regulated payments system.
However, the National Payments Corporation of India (NPCI), a government body operates as a special division of India’s central bank that oversees UPI in the country, said in a statement that it is not aware of any crypto exchange using UPI. The Reserve Bank of India is also seeking more scrutiny on digital assets.
The issue is that cryptocurrencies are not legal tender in India, so a regulatory body like the NPCI will not approve it unless it is legal. This has also caused a situation in which exchanges are using UPI via payment aggregators, India’s Economic Times reported.
According to Reuters, India’s crypto market sits is worth around 400 billion rupees (US$5.37 billion). The country has one of the highest rates of cryptocurrency investment in the world, and is the top country after Vietnam for crypto adoption, according to Chainalysis’ 2021 Global Crypto Adoption Index.
India’s new 30% crypto tax rule – which treats the virtual assets like gambling profits – came into effect on April 1, prompting a plunge in trading activity in the country. Trading volume on top Indian crypto exchanges fell by up to 70% in the past 10 days, according to Indian blockchain analytics firm Crebaco, CoinTelegraph reported.
WazirX, the country’s top crypto exchange, saw trading volume fall from $47.8 million on April 1 to $13.2 million on Sunday, while trading volume on CoinDCX dropped from $12.16 million to $5.76 million.