CoinDCX, the top crypto exchange in India, has seen a massive increase of 2000% in customer deposits after the finance ministry sent a warning letter to nine prominent overseas exchanges like Binance on December 28.
Binance, Kucoin, Huobi, Kraken, Gate.io and Bittrex are popular trading platforms that don’t follow US rules about money laundering. They now have a warning to explain why they didn’t obey the law or face other consequences. The Financial Intelligence Unit of India asked the IT ministry to block these exchanges’ websites. They think they are doing bad things inside India.
CoinDCX said in a statement that their platform saw a huge deposit increase of 2,000% from December 28. CryptoNews shared this.
Sumit Gupta, the boss of CoinDCX and its co-founder said again that CoinDCX is committed to providing a safe and legal place for people to put their money. Also, he said that CoinDCX is offering rewards for people who want to move their assets over to the platform.
1% TDS Blamed for Lower Trading Volumes
In India, when a 1% TDS (Tax Deducted at Source) was introduced on cryptocurrency exchanges, it led to a major change in the local exchanges’ trading volume. After it started in July 2022, there was a big drop of almost 90%.
From February 2022 to July 2022, around three to five million Indian users switched from local platforms to those in other countries. This move was marked by the surprising count of 450,00 new users in a single online trade just one month after starting TDS in July 2022.
Nevertheless, a significant number of international cryptocurrency exchanges failed to adhere to the 1% TDS guideline. The domestic exchanges were responsible for the majority, approximately $29 million (Rs. 250 crores), accounting for 97% of the total collected TDS. Shockingly, Indian traders on offshore platforms only contributed $840,000 (Rs. 7 crore), representing a mere 0.2% of the expected $420 million (Rs. 3,500 crore) collection.
Offshore exchanges have been served a show cause notice, compelling them to adopt TDS measures, or they risk being prohibited from conducting operations within India. These foreign exchanges are required to respond to the show cause notice by 11th January, failure to do so will result in a complete ban on their operations within India.
In a recent interview with CryptoNews, CoinDCX co-founder expressed his concerns about the 1% TDS being imposed, stating that it could potentially have a catastrophic impact on the industry.
Local Web3 Advocacy Body Urged Action Against Offshore Entities
Earlier reports indicated that the Indian government’s decision to restrict access to nine international cryptocurrency exchanges and serve them with show-cause notices was a direct response to a formal plea made by the advocacy group representing the Indian crypto and Web3 community.
On December 16, correspondence was sent from Dilip Chenoy, who holds the position of Chairman at Bharat Web3 Association (BWA), addressing Sanjay Malhotra, the Secretary of the Department of Revenue in the Indian Finance Ministry. CoinDCX and various other indigenous exchanges are strongly affiliated with the Bharat Web3 Association.
Frequently Asked Questions:
How did CoinDCX experience a substantial surge in deposits?
CoinDCX witnessed a staggering increase of 2000% in their deposit numbers following the show cause notice sent by the Indian Finance Ministry to nine prominent offshore exchanges, including Binance. The notice was served due to their failure to adhere to local money laundering regulations. Consequently, users began actively searching for secure and complaint options, ultimately leading them to CoinDCX.
What made them give warnings to foreign trading platforms?
Recently, Binance, Kucoin and Huobi offshore exchanges got warning letters from India’s Financial Intelligence Unit. These signs say that their illegal activities in India are against the law and they didn’t follow local rules about hiding money.
How has CoinDCX reacted to the increase in deposits during the third quarter?
Sumit Gupta, the boss of CoinDCX and one of its founders, said again that CoinDCX is committed to giving a secure place for investing. CoinDCX is also giving gifts to people who want to move their things onto the platform.
How much did the introduction of a 1% TDS (Tax Deducted at Source) change the levels of crypto trading activity in India?
After the 1% Transaction Duty Stamp (TDS) on cryptocurrency swaps was introduced in July 2022, trading activity on local exchanges saw a drastic drop which equalled roughly 90%. Consequently, there occurred a substantial migration of Indian users towards offshore platforms.
What was the reaction of offshore exchanges in the face of the 1% TDS rule?
The 1% TDS rule was not adhered to by several offshore exchanges, demonstrating a lack of compliance. Notably, a significant majority of the collected TDS, roughly $29 million (equivalent to Rs. 250 crores), was accounted for by domestic crypto exchanges. In contrast, trades conducted by Indians on offshore platforms only contributed a mere $840,000 (around Rs. 7 crore).
When do offshore exchanges need to reply to the show cause notice?
Offshore exchanges are given a deadline of January 11th to provide their response to the show cause notice. Failure to do so would result in a blanket prohibition on their operations within India.
What prompted the Indian government to initiate measures against offshore exchanges?
The Bharat Web3 Association (BWA), a representative organization for the Indian cryptocurrency and Web3 community, has formally requested the blocking of offshore exchange websites and the issuance of show-cause notices to these non-compliant entities. In response to this request, CoinDCX, alongside several other local exchanges, who are all members of the BWA, have supported and called for action against these non-complying entities.
According to CoinDCX, how did the 1% TDS affect the cryptocurrency industry?
During a recently conducted interview with CryptoNews, the co-founder of CoinDCX expressed their concerns regarding the 1% TDS, labelling it as a catastrophic setback for the entire industry. This interview shed light on the formidable obstacles that the crypto ecosystem in India is facing as a result.