Ali Raza
The Binance cryptocurrency exchange is making inroads in the cryptocurrency market in India. The growth of Binance in India comes amid heavy taxes imposed on cryptocurrency activities in the country.
Crypto traders leave Indian exchanges for Binance
A report by Bloomberg revealed that downloads for the Binance app in India had increased to 429,000 last month. This was the highest level reported in 2022, nearly triple the amount reported on CoinDCX, which has the second-highest number of downloads.
Binance was the only leading exchange with the highest downloads in India for August compared to July. The performance of Binance stands out in a market where competing exchanges are still being affected by the high taxes and the complexity of transferring funds in and out of the exchanges.
India implemented a 1% tax on crypto transactions in July. Since then, the daily trading volumes on India-based crypto platforms have dropped by 90%. Native exchanges in India have been deducting the tax levy. Still, foreign counterparts such as Binance and FTX are yet to start deducting the levy, leading to investors choosing the latter.
The Bloomberg report added that Binance had responded, saying that it was “monitoring the situation and will make further announcements in due course.” However, the FTX exchange has yet to communicate if it plans to start deducting this levy soon.
Before the recent spike in downloads for the Binance app, the exchange giant was involved in an online spat with the WazirX cryptocurrency exchange. At the time, the Binance CEO, Changpeng Zhao, encouraged WazirX users to migrate to Binance. In August, WazirX monthly downloads plunged to 92,000 from around 596,000 In January this year.
Besides the 1% TDS tax imposed by the government, there was also a 30% tax on gains on the transfer of cryptocurrency assets. The tax is higher than what is charged in other jurisdictions, such as the US and the UK.
The crypto regulatory framework in India has also been unfriendly. The rules launched this year prevent traders from offsetting losses against income. Additionally, there is limited support from the banking sector, making it hard to fund accounts and switch from tokens to fiat cryptocurrencies.
Dropping downloads for cryptocurrency exchanges in India
While some crypto social trading platforms like Binance are winning, some are recording notable download declines. CoinDCX reported a decline in downloads that dropped to 163,000 in August from the 2.2 million reported in January.
The FTX exchange also reported around 96,000 downloads in July and 52,000 in August from around 40,000 in January. On the other hand, the Coinbase exchange has said that it complies with the crypto taxation laws introduced in India. However, the compliance seems to be affecting its usage numbers, as downloads fell to 16,000 in August from around 31,000 in June.
While traders are exploiting some loopholes, the founder of cryptocurrency asset tax advisory company, Quagmire Consulting, has said that the government will still require that the tax be deducted at the source, saying that the tax would be accessed one way or another and that exchanges users were not aware of this.
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This article was written for Business 2 Community by Ali Raza.
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