India’s Crypto Market Faces Falling Depth and Price Discovery Issues as 1% TDS Cuts Capital, While Stablecoins and Tokenized Assets Gain Momentum for Faster Settlements and Global Trade Expansion.
India’s crypto market continues to push for clarity as tax rules shape market behavior and trading patterns. WazirX CEO Nischal Shetty recently highlighted how the Indian crypto TDS framework has disrupted market liquidity and trader participation.
Shetty stated that the current 1% TDS removes working capital from the system and weakens trading efficiency. He suggested either removing the tax or sharply reducing it to 0.01% to balance the market better. He avoided timelines for reforms but expressed confidence that policy changes may follow regulatory progress.
Impact of TDS on Market Liquidity
The crypto market’s liquidity challenge remains the most pressing issue associated with this tax structure. Shetty described liquidity as the single biggest casualty, as repeated deductions reduce usable capital across multiple trades. Active traders face compounding tax deductions, which limit their ability to operate efficiently on domestic exchanges.
Market depth and price discovery have also suffered under the current structure. Lower liquidity reduces trading volumes and affects how accurately assets reflect demand and supply. This shift has discouraged experienced traders and impacted overall participation in the Indian crypto market.
Traders Moving to Offshore Platforms
Offshore crypto trading has increased as a direct response to these tax conditions. Shetty noted that the tax has not reduced trading interest among Indians but has changed where trading occurs. Many traders have moved to foreign platforms that operate outside India’s tax and regulatory framework.
This migration creates risks for users and weakens India’s regulated ecosystem. Domestic exchanges see a decline in volume, while users trade on platforms that may not offer strong consumer protection or compliance standards. Shetty called for policies that make compliant Indian platforms more attractive to users.
Stablecoin adoption presents a strong opportunity for the next phase of crypto growth in India. Shetty described stablecoins as practical tools for payments, remittances, and settlements rather than speculative assets. He emphasized their ability to offer fast, low-cost, and programmable transactions.
An INR-backed stablecoin could further expand the use of the rupee across global trade networks. Businesses could settle transactions instantly on blockchain systems while maintaining transparency and regulatory oversight. He added that such a system would complement the central bank’s existing digital currency efforts.
Stablecoins and Tokenization Opportunities
Tokenized real-world assets also stand out as a future growth area. Shetty pointed to government bonds, gold, and real estate as early use cases where tokenization could improve transparency and settlement speed. Regulatory clarity remains essential before large-scale adoption can begin.
Disclaimer : Crypto News India does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.
