Indians Moved Over $3.8 Billion to Foreign Exchanges Since Crypto Tax Rules

Indians moved more than $3.8 billion in trading volume from local to international crypto exchanges after the country announced stiff crypto tax rules last February, according to a research study by Esya Centre, a New Delhi-based technology policy think tank. A total of $3.85 billion was shifted from February through October, the study said. CoinDesk reports: The report provides the first monetary estimate of the impact of India's controversial crypto tax policy on domestic exchanges. Prime Minister Narendra Modi's government announced a 30% tax on crypto profits and a 1% tax deducted at source (TDS) on all transactions on Feb. 1, 2022. The 30% tax went into effect on April 1, and the 1% TDS on July 1. When the taxes were announced the industry was unable to back up its prediction that the levies would "kill liquidity." The Esya Centre report found that domestic exchanges lost 81% of their trading volumes in four months after the imposition of the much debated 1% TDS rule.

The report said that India's virtual digital-asset (VDA) industry is "crippled under the current tax architecture" and that the "baseline scenario" under the current structure is that "almost all" Indian centralized VDA users will move to a foreign exchange. The researchers recommend TDS should be changed from 1% per transaction to 0.1%, which would be on par with the securities transaction tax. They also recommend allowing losses to offset gains and establishing progressive taxes on gains instead of the flat 30% tax. As a current account deficit nation at an all-time high of $36.4 billion, India requires money to flow in as opposed to outflows to offshore exchanges that bypass banking channels. The latest findings might put pressure on authorities to clamp down on outflows through crypto that add to India's current account deficit.

Good idea?

[Antique Geekmeister]

India seems vulnerable to just the sort of fraudl and Ponzi schemes that cryptocurrency has become notorious for. Chasing the tips of the Ponzi schmes out of the country seems a wise move.

Good luck

[gnasher719]

So India needs money to flow into the country, not leave. To the Indian government: Consider these 3.8bn to be gone. To Indian investors/gamblers: Consider these 3.8bn to be gone.

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[iAmWaySmarterThanYou]

It was never there. It's crypto. Not money.

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[YetAnotherDrew]

It was never there. It's crypto. Not money.

Wait . . . where is money?

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[iAmWaySmarterThanYou]

Wait... where is clever humor? Oh right, not in your post.

Are you ESL? That would explain it.

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[ShanghaiBill]

It was never there. It's crypto. Not money.

The $3.8B leaving is Indian rupees being converted into other currencies. It's real money.

But $3.8B in a country of 1.4B people is less than $3 per person.

The cash outflow might have nothing to do with crypto. India is a big energy importer and one of the biggest losers from the war in Ukraine.

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[iAmWaySmarterThanYou]

Money put into crypto is burned money. It doesn't matter what country it might technically exist in. Does it matter if their money was burned in an Indian crypto exchange or an international one?

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[misnohmer]

The $3.8B leaving is Indian rupees being converted into other currencies. It's real money.

Is it all real? If you converted real money to buy a bitcoin in 2016, but transferred it out of the country today. Did you transfer $400 or $16,500 of real money out of the country? Or is it $400 real money and $16,100 of unrealized gain?

Of course opposite is true to. The $3.8B crypto transferred may have actually costed $10B or more in real currency at the time of purchase. We'd need deeper analytics to determine the amount of real money that left the country.

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[clovis]

It was never there. It's crypto. Not money.

And I wonder, of those $3.85 billion in trades, how much was wash trades.

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[iAmWaySmarterThanYou]

I've read but have no evidence I've personally seen that most crypto transfer, up to 90% are whales washing just to make the market look more active than it is.

Others who have analyzed the trade data on the chain make this claim and I've never seen anyone dispute it.

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[rsilvergun]

None of this money was ever really going to make it into the broader economy. Money laundering and tax evasion doesn't help honest working class people. It just lines the pockets of criminals while opening up the possibility of people who don't know any better getting scammed.

And I'm sure the Indian authorities I'll have a lot to say about people moving money overseas to avoid paying taxes. This isn't nearly enough money to make them look the other way. These people can expect a call from the Indian equ

India is a democracy in name only

[bigbang137]

The Indian government is the biggest thief via taxation. They have the world's highest sales tax, a serious income tax, ridiculous taxes on investments, a currency inflating much faster than the dollar on average which effectively makes it a wealth tax, and this outrageous crypto tax. Its citizens don't really get much out of it, just more heat and more pollution. It's going to face a precipitous collapse in the coming years. People can't survive on toxic air or in 50C heat. Meanwhile, the bribes keep flowi

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[Ritz_Just_Ritz]

Maybe you should deal with the disease of corruption rather than the symptom of capital flight.

Crypto is a scam, but perhaps people feel like the bigger scam is to leave their capital inside the country.

Best,

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[bigbang137]

Those who call crypto a scam show that they don't understand anything about it except that it has price dumps and thefts. Self-custodied major cryptos like Bitcoin and Monero are most definitely not a scam if they were secured using a permanently cold device. They do have price swings but these should go down to what we see for gold as the decades pass by.

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[mjwx]

The Indian government is the biggest thief via taxation. They have the world's highest sales tax, a serious income tax, ridiculous taxes on investments, a currency inflating much faster than the dollar on average which effectively makes it a wealth tax, and this outrageous crypto tax. Its citizens don't really get much out of it, just more heat and more pollution. It's going to face a precipitous collapse in the coming years. People can't survive on toxic air or in 50C heat. Meanwhile, the bribes keep flowing, making the rich richer and the poor poorer.

Taxes which never get paid.

You really should familiarise yourself with how taxes work in that part of the world. You only ever pay enough to make the problem go away. I'd bet that businesses pay more in bribes to avoid taxes than they do in actual taxes and even then it won't be much. Huge corporations like Tata will not be paying much as they've Modi in their pockets, the level of everyday corruption in Indian business will make the Tory/Michelle Mone thing look positively benign by comparison.

It doe

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[bigbang137]

Oh it's collected perfectly well from salaried individuals. They tend to suffer the most from this collection.

That's not how it works.

[gavron]

Nobody cashed out $3.8B and moved it. They moved the magic numbers newsies and cryptobros pretend is money.

If you have your magic number in India and move it to Switzerland or Denmark or England or the US you have moved this much:
$ 0 USD.

People should remember: cryptocurrency is NOT a currency except you can trade it on the darkweb or at times people will offer you more today for it than you paid yesterday. It's a sucker's gamble, but that aside for now.

The $3.8B wasn't $3.8B. It was $0. It was N x Y

30% is not much

[MS]

In Italy we pay 26% tax for capital gains on local stocks, and up o 52% for stocks from foreign companies (like Switzerland).

I guess they got what they wanted.

[dhrabarchuk]

I mean a 30% tax is a clear message to the industry to get out of India. Tax revenue was clearly not the real goal.