Exclusive: India’s Third Consecutive PM Modi Retains Finance Minister, Crypto-Friendly Approach to Continue? Exchanges React
Narendra Modi has once again sworn in as India’s Prime Minister for the third-term on Sunday with coalition allies. The PM has re-appointed Nirmala Sitharaman as the country’s finance minister, which gains mixed reactions from the nation’s crypto community.
Sitharaman emphasized the importance of international cooperation in crypto policies, however, also noted that they cannot function as currencies.
One good thing was Indian government prioritized framing a crypto policy last year with global consensus, during its presidency of the G20 nations. Additionally, PM Modi also stressed on a need for a global framework on cryptocurrencies during the B20 Summit India 2023.
That said, India levied an upsetting 30% tax and 1% TDS on crypto gains, pushing the hopes of a crypto-friendly environment further down.
However, Saravanan Pandian, Founder and CEO of KoinBX crypto exchange believes that there’s “certainly potential for positive change in India’s crypto policy in the near future.”
Speaking to CryptoNews, he said that India’s crypto policy framework goals indicate “willingness to engage with the growing importance of crypto assets.”
“With proper regulation and clarity, India can harness the benefits of this emerging technology while addressing potential concerns. We remain hopeful for a constructive and forward-thinking approach from the Indian government in shaping its crypto policy.”
KoinBX crypto exchange, which celebrated its 4th anniversary last September, pioneering a remarkable journey in the Indian crypto space, has over 1.5 million users and more than 120 crypto assets portfolio.
Sumit Gupta, Co-Founder of one of India’s major crypto exchanges CoinDCX, also has a positive outlook. In an exclusive interview with CryptoNews, he told that “if considered positively, [cryptos] will provide a level playing field for domestic exchanges.”
Indian Cryptocurrency Exchanges Keeping Pace With AML Framework
India’s crypto service providers were brought under the country’s anti-money laundering (AML) framework in March 2023. The country mandated exchanges to comply with the rules.
Further, India has been cracking down on non-compliant crypto exchanges operating in the country, issuing notices to nine exchanges in December including Binance, Kraken and MEXC Global.
To meet the stringent requirements stipulated by the authorities, KoinBX dedicated significant resources to enhancing KYC and AML procedures.
“This includes thorough identity verification processes and robust transaction monitoring systems to detect and prevent any illicit activities,” Pandian noted.
Additionally, the exchange implemented real-time sanction scanners to screen transactions against global sanction lists. “These measures, along with enhanced due diligence and continuous monitoring, help us maintain regulatory standards and provide a secure trading environment for our users.”
CoinDCX exchange was the first in India to register with Financial Intelligence Unit – India (FIU-IND), on March 16, 2023, says Sumit Gupta. The exchange is also a member of CyberSafe, an initiative of the ministry of home affairs, India.
“We established a dedicated team across product, operations, technology, service, and compliance to ensure adherence to FIU Guidelines and proactively close any gaps.”
India’s Cryptocurrency Tax Slab: A Trigger to Further Crypto ‘Brain Drain’
India has been keeping stiff taxes on crypto transactions – a 30% tax on profits and a 1% TDS on all transactions. India’s crypto industry has urged the government to reduce the 1% TDS to 0.01% ever since it was first announced.
Per a recent report published by Indian think tank Esya Centre, the imposition of 1% tax-deducted-at-source (TDS) on the trading of cryptos has led to a massive shift of millions of users to offshore crypto exchanges. Further, the report revealed that the 1% TDS resulted in the loss of potential revenues of approximately $420 million.
Earlier, in an exclusive interview with CryptoNews, CoinDCX co-founder Neeraj Khandelwal called 1% TDS “a death blow” to the industry.
Gupta noted that the exchange saw over 95% drop in volumes since the taxation rules were announced.
“Despite these hurdles, we are striving to regain user engagement. But the global environment creates a regulatory arbitrage that complicates our efforts.”
CoinDCX and the Bharat Web3 Association have been actively engaging with the government to advocate for a tax reduction.
“We remain hopeful that our requests will be considered. The current tax structure not only hampers growth but could also trigger a crypto ‘brain drain,’ pushing talent and innovation out of India.”
Saravanan Pandian also stresses the industry’s concerns about the impact of these taxes on innovation and growth. He noted that taxes not only affect the profitability of traders but also increase operational costs for exchanges like KoinBX.
These taxes could indeed trigger a ‘brain drain’ from the crypto industry in India, Madurai-based Pandian of KoinBX, added.
“We’re committed to navigating these challenges while urging the government to reconsider its tax policies to support innovation and growth in the sector.”
KoinBX has been actively engaging with policymakers through active participation in the industry’s policy advocacy body. “We ensure that our perspectives are heard and considered in the legislative process, ultimately contributing to a regulatory environment that balances innovation with appropriate safeguards,” said Pandian.
KoinBX is planning several new features and launches in the coming months, including security protocol advancements and new trading pairs. The exchange will also rollout innovative tools to empower users with greater control and flexibility over their portfolios.
Effects of Crypto ETF Approvals on the Indian Soil
Global crypto industry is seeing positive growth, thanks to the Bitcoin and Ethereum spot ETF approvals by the US SEC. As a result, India is experiencing an increasing institutional interest in these financial products like the West.
According to Gupta of CoinDCX, the move has significantly boosted market activity in India, however, “regulatory uncertainties pose a roadblock.”
“To cater this interest, we recently launched CoinDCX Prime, which gained the support of over 100 institutional investors,” he added.
CoinDCX reported a 2000% increase in deposits from customers early this year, marking a significant milestone. Gupta also added that the exchange is offering incentive to users who want to migrate their assets to CoinDCX.
“We opened deposit routes and earmarked $1 million in incentives for those moving their assets to our platform.”
The exchange recently launched Okto orchestration layer designed to simplify the Web3 landscape by offering a unified approach. This makes it easier for developers to integrate blockchain functionalities into their applications.
“We are also developing the $OKTO token, which will power the Okto Chain,” Gupta said. “This token is crucial for maintaining network security and promoting the ecosystem’s overall growth.” Furthermore, CoinDCX is planning to airdrop seven percent of the total $OKTO token supply to early adopters.
