India’s Crypto Market Crosses 120 Million Users Despite 30% Tax as Parliament Begins Fresh Discussions on Regulation, Compliance, and the Future of Virtual Digital Assets (VDAs)
Indian policymakers begin fresh discussions around regulation, taxation, and compliance for Virtual Digital Assets (VDAs). Despite being one of the world’s most strict tax regimes, India remains among the largest digital asset markets globally.
India has over 120 million crypto investors, while the country contributes around 12% of the world’s blockchain developer talent, according to industry estimates. India processed more than $260 billion in crypto-related transaction volume in recent years despite regulatory uncertainty and restrictive taxation.
India’s Crypto Taxes Reduced Trading Activity
India imposed 30% tax on crypto gains and 1% Tax Deducted at Source (TDS) on all transactions in 2022. The decision officially acknowledged Virtual Digital Assets (VDAs) in the tax regulation, but it also had a substantial impact on the liquidity in the market.
Sathvik Vishwanath, Co-Founder and CEO of Unocoin, notes that 1% TDS had “impacted liquidity and active trading participation.” Data from industry sources indicate that trading volumes on exchanges in India fell notably after the tax rules came into effect, and some traders moved their trading to offshore exchanges.
However, the crypto adoption did not stop. Rather, the Indian investor began to shift focus to longer investment periods and patterns like those of gold and equity investing.
India Remains a Major Global Crypto Market
With a vast fintech ecosystem, youthful digital population, and a pool of blockchain talent, the significance of India in the crypto sector remains on the rise.
Indian Web3 startups are developing products for foreign markets, with the country accounting for around 12% of all blockchain developers globally. India also facilitates one of the largest real-time digital transactions using UPI infrastructure, which builds a solid foundation for the future adoption of blockchain in India.
“What is holding back broader mainstream growth is regulation,” says Ashish Singhal, Co-Founder at CoinSwitch. “If regulations become more innovation-friendly, India can shift from being just a talent hub to a full-stack Web3 ecosystem.”
Also Read: India’s Crypto Boom at Risk: 30% Tax, 1% TDS and 20M Users Stuck in Rule Confusion
Industry Wants Clarity, Not Deregulation
Most of the crypto industry is seeking rules, not deregulation. The following are important industry requirements:
- Reduction of the 1% TDS
- Rational crypto tax slabs instead of a flat 30%
- Legal recognition of VDAs as a separate asset class
- Licensing frameworks for exchanges and Web3 firms
- Alignment with global crypto regulations
“Infrastructure, talent, and appetite of investors are all ready,” says Edul Patel, Founder and CEO of Mudrex.
Parliament Begins Discussions on Crypto Regulation
The Parliamentary Standing Committee on Finance is set to hold discussions with representatives from Binance, WazirX, and ZebPay on May 20 as part of its ongoing study on Virtual Digital Assets (VDAs) and their future in the country.
Separate sessions are scheduled for the day under the subject, “A Study on Virtual Digital Assets (VDAs) and Way Forward.” Lawmakers to Examine Crypto Regulation, Taxation, and Compliance.
The notice states that the meeting between representatives from ZebPay, Binance, and WazirX is scheduled between 11:00 am and 12:30 pm. This comes at a time when the crypto industry continues to operate in a regulatory gray area despite heavy taxation.
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