Crypto exchanges in India face the unknown amid new tax and market crash
India's largest digital asset exchange is preparing for a prolonged crypto winter, with some unwelcome domestic volatility.
With cryptocurrency prices plummeting, customers unable to transfer funds into their accounts, and a feared transaction tax on coins imminent, exchanges like Binance-backed WazirX are making expansion plans their last priority.
“We have cut all our non-significant costs, we are only hiring essential staff, and we are not spending money at all,” said Rajagopalan Menon, vice president of Waserex, using descriptions of an extended bear market.
WazirEx is not alone in this move, as rival exchanges Unocoin and BuyUcoin are also responding to vanishing trading volumes in the market, which only last year ranked second in the world in terms of cryptocurrency adoption. .
Unsurprisingly, the cryptocurrency market is in a cost-cutting mode, with Coinbase Global and Crypto.com only announcing layoffs in the past two weeks, but Indian exchanges are facing the added burden. A new tax system, which executives fear, will wipe out what little circulation is left. Wazirex's daily trading volume is down 95 percent since October, according to data from CoinGecko.
On July 1, a 1% withholding tax is set to apply to all transfers of digital assets over a certain size, despite industry warnings that the tax will lead to poor liquidity.
The tax comes on top of the current 30% rate on income from these assets, along with a proposed value-added tax increase that is making its way through the bureaucracy. Also, the government does not allow compensation for trading losses on cryptocurrencies, and treats them differently from stocks and bonds.
To make matters worse, cryptocurrency exchanges have been largely cut off from the regular banking system since mid-April; This is what happened when the Unified Payments Interface in India became unavailable to these exchanges without explanation, which prompted some banks and payment gateways to cut the service as well, which in turn meant that traders were unable to feed their accounts with cash.
These developments represent a marked turnaround from last year, when India was one of the most important cryptocurrency markets in the world, expanding the market by more than 600% in the 12 months to June 2021, according to research firm Chain Analysis, which used a metric to estimate The total amount of cryptocurrency received in a country.
Cryptocurrency exchanges have also run full-page ads in newspapers, and hired Bollywood stars to promote their offerings to some of the world's youngest people. Powered by Coinbase, CoinDCX has become the official sponsor of the India-Sri Lanka cricket series.
“Last year was the golden age, where we went from six programmers to 50 in seven months,” Menon said. He noted that Waserex has added "a few developers, and some very important senior staff" since that hiring boom.
Spending on influencers
The spending cut plans don’t apply to everyone, Vinay Tiwari, senior vice president of finance at CoinDCX, said in an interview that the platform, which raised $135 million in April from funds including Pantera Capital), is not planning to cut costs, which puts it apart from the rest of the exchanges.
CEO Shivam Thakral also mentioned that PayUcoin, a small exchange with 45 employees, is only hiring developers and engineers. It's also cutting spending on things like partnerships with social media influencers and avoiding mass advertising, he added, adding that PayUcoin's trading volume has fallen nearly 80% since it peaked last year.
In addition, Satvik Vishwanath, CEO of cryptocurrency exchange Unicoin, told Bloomberg, “All companies are being careful when it comes to expenses now, and the same goes for us as well. redundant appointment.
Vishwanath also added that he would assess the impact of a transaction tax, known as TDS, before making any major strategy decisions. He stated that the sector put pressure, to no avail, on the government to reduce the tax rate.
With no expectations of immediate calm, current employees at Waserex may have to take on more work. “If someone left the company, the quick replacement was fairly immediate,” Menon said. Someone can carry the burden of this position in addition to his position."
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