Vipul Mishra
In a significant development for India’s cryptocurrency market, CoinDCX, a leading crypto exchange, reported a staggering 2000% increase in customer deposits. This surge followed the Indian finance ministry’s action on December 28, when it issued show cause notices to nine major offshore exchanges, including Binance.
The offshore exchanges, including names like Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex, faced scrutiny for not complying with India’s money laundering laws. The Financial Intelligence Unit of India further pushed for the blocking of these exchanges’ URLs by the information technology ministry, citing illegal operations in India.
According to a press statement from CoinDCX, shared with CryptoNews, the exchange experienced this remarkable deposit increase starting from December 28. Sumit Gupta, CoinDCX‘s co-founder and CEO, emphasized the company’s commitment to ensuring a safe and regulation-compliant investment environment for its users. He also mentioned that CoinDCX is offering incentives for users who are considering moving their assets to the exchange.
In this context, Gaurav Mehta, founder of Catax, a blockchain auditing and accounting firm, commented, “The recent regulatory actions in India have accelerated a major shift in the crypto landscape. While it presents challenges, it also opens up opportunities for local exchanges like CoinDCX to grow and solidify their position. Compliance and transparency are going to be key for these platforms moving forward.”
Since July 2022, when a 1% tax deducted at source (TDS) on crypto transactions was implemented in India, trading volumes on domestic exchanges plummeted by almost 90%. This tax led to a massive migration of users to offshore platforms, with one such platform registering about 450,000 new sign-ups in just a month following the TDS implementation.
Interestingly, despite the exodus to foreign exchanges, compliance with the 1% TDS rule was largely overlooked. While domestic exchanges contributed about 97% of the TDS collected, approximately $29 million (Rs. 250 crore), the trades by Indians on offshore platforms only accounted for about $840,000 (Rs. 7 crore), a mere 0.2% of the expected $420 million (Rs. 3,500 crores).
The recent crackdown on offshore exchanges now mandates these platforms to adhere to the TDS regulations or face a ban in India. They have until January 11 to respond to the show cause notices.
Previously, in an exclusive interview with CryptoNews, the co-founder of CoinDCX labeled the 1% TDS as a significant blow to the industry.
The Indian government’s move against offshore exchanges, including the blocking of their URLs and issuance of show cause notices, was reportedly influenced by a request from the Bharat Web3 Association (BWA). Dilip Chenoy, the Chairman of BWA, had sent a formal letter to the Secretary of the Department of Revenue, urging action against these offshore entities. CoinDCX, along with other local exchanges, is a member of the BWA.
Source: CryptoNews