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Crypto

Crypto Exchanges Get Ready when Everything Goes Bad in India

The largest exchanges for digital assets in India are anticipating a lengthy cryptocurrency winter with some unexpected local twists.

With the price of tokens plummeting, customers cannot transfer funds to their accounts, and the notorious transaction tax for cryptocurrencies is just around the corner, exchanges such as the Binance-backed WazirX have made plans for expansion in the back of their projects.

“We have cut down all our non-critical costs,” stated Rajagopalan Menon, WazirX’s vice president. “We employ only essential employees. We aren’t investing any money at all. It’s a literal winter in crypto,” he said, employing industry jargon to describe an extensive bear market.

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WazirX isn’t the only one. The rival exchanges Unocoin and BuyUcoin are also reacting to declining trading volumes in a sector that last year was second in the world in adopting crypto.

The fact that a crypto market is in a state of cost-cutting is not a surprise. It is a fact that Coinbase Global Inc. and Crypto.com have announced layoffs over the past two weeks; however Indian exchanges are also facing the cost of a new tax system, which executives are worried will wipe out the remaining trading. WazirX’s daily volumes have dropped approximately 95% from October, as Data from CoinGecko illustrates.

Freefall

The volume of trading on WazirX, the most prominent Indian cryptocurrency exchange, has plummeted. On July 1st, a tax deduction at the source of 1 percent on all digital asset transfers that exceed a certain amount is in effect, despite warnings from the industry that it could reduce liquidity. It’s on the top existing tax rate of 30% on the income derived from these assets and a value-added tax being pushed across the bureaucratic maze.

The government is also not allowing the offset of losses from trading on cryptocurrency and treats them differently than bonds and stocks.

In addition, since April, crypto exchanges have been isolated from the standard banking system. This was when India’s ubiquitous United Payments Interface was made unusable to the crypto market without explanation, causing some banks and payment gateways to shut down service, which resulted in traders not being able to top up their accounts using cash.

It’s an astonishing contrast from last year when India was among the top crypto markets around the globe. India’s demand for cryptocurrency increased by more than 600 percent over 12 months from June 2021 to June 2021, according to research firm Chainalysis which utilized a method to calculate the amount of cryptocurrency received by a nation.

Crypto exchanges put out full-page newspaper ads and signed Bollywood stars to advertise their products in front of one of the planet’s newest populations. Coinbase’s CoinDCX was named an official sponsor for an international cricket match that was played between India as well as Sri Lanka.

“Last year that was the golden age,” Menon said. Menon. “We went from six programmers to 50 in seven months.” WazirX has just added “a few developers and some critical senior people” since the hiring surge, he stated.

Influencers’ Spending

It’s not everyone is taking a breather. CoinDCX has raised 135 million in April from investors such as Pantera Capital and isn’t planning to reduce expenses; Vinay Tiwari, its chief financial officer, spoke to me during an interview.

This makes it an exception among exchanges.

BuyUcoin, the smallest company with just 45 employees, has been concentrating on hiring engineers and developers, CEO Shivam Thakral said. The company is also cutting back on collaborations with social media influencers and shunning mass advertising, According to Thakral. He explained that the BuyUcoin trading volume had decreased around 80% since its previous peak.