India's new tax on cryptocurrencies has been a major blow to the country's exchanges, adding to sectoral woes and sending trading volumes plunging by up to 90%.
A 30% digital income tax and a burdensome regulatory regime have already knocked down volumes by 60 -- 70% of India's trades of cryptocurrencies since the beginning of this month, which is a disincentive for investors, traders and industry executives said.
As far as volumes are concerned, we are scraping the bottom of the barrel," said Rajagopal Menon, vice president of the WazirX criptocurrency exchange.
The regulatory tangles, lack of ease of doing business and paperwork that has been created on every single trade has made investors and traders wary and we are seeing that people are moving to international exchanges or the grey market. Since the prices of cryptocurrencies have come down, trading volumes have gone up, even though Indian exchanges have been hit.
When the price of bitcoins fell sharply on May 11, it was up 84% from April, according to specialist research firm CryptoCompare, which traded a maximum daily volume of $137 billion.
The price ofBitcoin, the world's largest criptocurrency, has had the worst quarter on record, with the outlook still challenging and the price down 56%. Lower trading volumes have dragged down revenues for Indian exchanges, which have cut back on marketing and hiring while formulating strategies to ride out any protracted downturn.
Kumar Gaurav, founder of Cashaa, said a number of companies were laying off people after hiring a huge number last year, and now have to look at operational and other cost-cutting measures.
Some executives have said that the recent woes for the Indian cripto exchanges could lead to consolidation.
A bear market is a cleansing process and weak businesses will perish while companies with the right business model will emerge stronger, said Ashish Singhal, CEO of CoinSwitch.