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Fortune: Crypto trading in India plummets as much as 70% as new hurdles scare off investors

Fortune: Crypto trading in India plummets as much as 70% as new hurdles scare off investors

The cryptocurrency boom in India, which has the world’s second-largest community of crypto investors, may be turning into a bust.

“In general, we have seen trading volumes [on Indian exchanges] come down by 30%-40% in the last two to three weeks,” Nischal Shetty, founder and CEO of WazirX, India’s biggest cryptocurrency trading exchange told Fortune.

Other Indian crypto exchanges say their trading volumes have been hit too.

Sumit Gupta, co-founder and CEO at CoinDCX, blames the 30-35% drop in trading volume on his exchange, one of India’s largest, on global and domestic factors. Bitcoin has been stagnant at $39,000 to $40,000 for several months, while large traders have slowed their activity due to new taxes, he says.

Atulya Bhatt, co-founder of BuyUcoin, an Indian cryptocurrency exchange, says trading volume on his platform has fallen up to 70% “since the new taxation came in this month.”

Drops in trading volume vary from exchange to exchange, but volumes on most crypto platforms have dipped 30%-40% in April from the prior month, says Raj Kapoor, founder of India Blockchain Alliance, a trade body for the crypto industry.

“It is just the beginning. Volumes will drop substantially if there is no [government] intervention,” says Kapoor. “It is not going to be healthy for a nation like ours. When you have an elephant in the room [like crypto], you have to learn how to dance with it or get trampled.”

The double whammy of new taxes and limited payment mechanisms has soured crypto investors’ sentiment in the South Asian country, home to 25 million investors who hold assets worth more than $6 billion—putting the future of crypto in India in doubt.

India’s new budget, which took effect when the new fiscal year started on April 1, imposed a 30% capital gains tax on cryptocurrency earnings, the same rate the government applies to winnings from horse racing and a significant increase from the previous scheme that didn’t specify taxes for crypto but applied income-based rates that maxed out at 30%. Under the new tax rules, cryptocurrencies are subject to a heavier tax than traditional asset classes like stocks, which are taxed at varying rates starting at 10%. The 30% tax rate on cryptocurrency gains applies even to earners whose total annual income is below INR 250,000 or $3,300 and are otherwise exempt from paying income tax.

“That is causing a lot of fear and stress in the younger population who are into crypto trading,” says Shetty.

In addition to the 30% tax on earnings, the finance ministry is levying a 1% tax on every crypto transaction starting in July in an effort to rein in speculative trading.

“Historical data indicates that transaction taxes significantly reduce trading volumes,” says. Kristin Boggiano, president of crypto exchange Cross Tower.

Italy, for example, introduced a 0.1% tax on equity transactions in 2012 that caused a 35% decline in trading volumes over a two-year period, Boggiano says.

A recent decision by Indian banks to stop funneling rupees to crypto exchanges via state-run Unified Payments Interface (UPI) is also hitting trading volume.

Typically, investors could transfer money from their banks to a crypto exchange wallet over UPI, India’s ubiquitous payments processor that’s responsible for 75% of all crypto transactions in India, according to Shetty’s estimates. Once the transfer hits a wallet, investors can use the money to trade cryptocurrencies, such as Bitcoin. But earlier this month, banks severed that financial plumbing, says Shetty.

The trouble started after Nasdaq-listed crypto exchange Coinbase, which launched rupee-based operations in India earlier this month, publicly said that its users could easily deposit funds to their accounts on the exchange using UPI, throwing the behind-the-scenes payments system into a glaring spotlight. In response to the ad, the state-run National Payments Corporation of India (NPCI), which runs UPI, said it was not aware that the payment platform was being used to buy cryptocurrencies.

The statement by the Payments Corporation caused banks to second-guess the legality of routing payments to crypto exchanges. Banks have operated in a state of semi-limbo regarding crypto transactions for years after the country’s Supreme Court in 2020 overturned an order by the Reserve Bank of India for financial institutions to cut all ties with individuals and businesses dealing in cryptocurrency. The Supreme Court said the order violated the freedom of trade guaranteed by India’s Constitution, freeing up banks to facilitate crypto transactions until the latest NPCI statement delivered another dose of ambiguity.

Without access to UPI, crypto investors are finding it tough to deposit money from bank accounts to their wallets on crypto exchanges.

“We are on a wait and watch mode,” BuyUcoin’s Bhatt. “We are hoping that this is a temporary situation.”

India’s crypto enthusiasts had been hoping that the sector’s era of uncertainty was coming to a close.

Last year, Reserve Bank of India governor Shaktikanta Das said he had “serious concerns” about the potential risks of cryptocurrencies, and the government had proposed prohibiting certain private cryptocurrencies. However, the imposition of taxes on crypto earnings had signaled the government’s intent to regulate digital assets, rather than ban them outright.

But the new tax burden and UPI saga have cast the market back into the unknown, and industry executives say scores of startups in blockchain and crypto are exploring bases outside of India as a result.

“What we are seeing is a flight of funds to outside the country. A lot of people are opening payment wallets outside of India,” Kapoor says. High volume traders and firms are opting for locations like Dubai because it’s easier for crypto businesses to operate there, says Kapoor.

This week, India’s Business Today reported that WazirX founders Shetty and Siddharth Menon had shifted their base of operations from India to Dubai. In an interview with Fortune, Shetty declined to comment on the report. “WazirX is headquartered in Mumbai and Bengaluru, and there is no change in our operating procedure,” the company said in a statement.

BuyUcoin’s Bhatt admits the company has considered relocating from India but says that “[moving is] not a topmost priority as we would like to serve users in India.”

Anndy Lian, Singapore-based chairman of BigOne Exchange, a cryptocurrency exchange based in the Netherlands, expects investors to leave India’s crypto market for rivals in Singapore and Dubai.

“Constantly, we have been asked by Indian communities to start in India. We do not have intentions to set up a base in India currently,” Lian says. “If the regulations are clearer, we might consider.”

 

Original Source: https://fortune.com/2022/04/23/india-cryptocurrency-exchanges-trading-regulation-tax-upi-payments-wazirx-coindcx-buyucoin/

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Are Regulations and Sanctions Driving Change in the Crypto Industry?

Are Regulations and Sanctions Driving Change in the Crypto Industry?

The powerful combination of incoming crypto regulation in the US, and the immediate global impact of Russian sanctions, mean the crypto exchange market looks to be in for a serious shake up in 2022. Just this week US Senator Elizabeth Warren announced a new piece of legislation to stop crypto businesses outside the US from working with sanctioned companies. It also authorizes the Financial Crimes Enforcement Network (FinCEN) to force US citizens with crypto transactions of $10,000 or more to report them.

Clearly global sanctions against Russia have moved crypto exchanges firmly into the center of geo-politics for the first time. Coinbase announced it was banning 25,000 Russian accounts. While Binance declared that: “To unilaterally decide to ban people’s access to their crypto would fly in the face of the reason why crypto exists.” But just as revealing was the news from Wasabi Wallet that it will start introducing censorship methods into its mixing procedures, showing that fear of regulation was starting to impact beyond mainstream exchanges even before Warren’s planned legislative action.

What this means in all probability is that the advantage the exchanges outside the US had in largely ignoring regulations, benefiting from lower overheads and restrictions to their business activity is well and truly over. It’s not all bad news, as the positive response to the US administration’s crypto executive order shows, but it certainly means the industry needs to consider what this means for the long term, and what this means for crypto investors and traders looking for the best deal or the most secure transactions.

The US executive order underlines the seismic changes in the administration’s approach to crypto by seeking “to establish the first-ever comprehensive federal digital assets strategy for the United States” and by directing the Depart of Commerce to create a framework that “drives U.S. competitiveness and leadership in, and leveraging of, digital asset technologies.” In summary the administration’s six key priorities, according to the fact sheet, are to protect US interests, protect global financial stability, prevent illegal uses, promote responsible innovation, financial inclusion, and US leadership. As confirmed in a CoinDesk report, the order does not lay out specific positions the administration wants agencies to adopt, or impose new regulations on the sector. Indeed, it was welcomed by many in the industry who see it as a positive step forward. According to Jeremy Allaire, the CEO of Circle, which runs stablecoin USDC, “this is a watershed moment for crypto, digital assets, and Web 3 akin to 1996/1997 entire government wakeup to the commercial internet.”

Circle CEO Jeremey Allaire in a Twitter thread responding to the news.

But as the legislative moves by Senator Warren demonstrate, its actions and not words that count. The recent news of action to reign in the SEC by the US Congress after its enforcement arm chased “information from unregulated cryptocurrency and blockchain industry participants in a manner inconsistent with the Commission’s standards for initiating investigations” shows that significant risks for crypto exchanges remain while the US decides its crypto policy.

Despite the understandable focus on the US crypto regulation in recent weeks this sea change hasn’t appeared overnight, for example the China ban on crypto trading and mining took place in 2021, after the ICO ban in 2017. In contrast in Singapore, a leading location for the crypto industry, as late as July 2021, while the rest of the world was hellbent on cracking down on crypto, “crypto players like Binance have found Singapore to be a paradise of opportunity, even while a regulations storm looms over the industry in other parts of the globe.” As recently as last October following the latest crypto crackdown in China, the city-state of Singapore was seen as a chief beneficiary of fleeing businesses.

But then in December 2021 Binance, with a daily turnover of US$76 billion, no doubt fed up with the delays and opaqueness of the MAS licensing system, withdrew its Singapore application. In 2022 how Binance responded is also revealing, with its move to partner with Paysafe in the UK, providing the exchange with access to the UK payments network despite concerns from the UK financial regulator the FCA. While this week Binance’s CEO CZ has been meeting Brazilian regulators after signing an MOU to buy a securities brokerage and secured a virtual asset license in Dubai in a series of moves underling its look to secure its future in a more regulated crypto marketplace.

All these moves, along with competitors such as FTX and Coinbase, are to establish a future in the more regulated global environment in crypto. Anndy Lian, chairman of BigONE Exchange said, “I believe these twin forces of policy regulation led by the US, and even tighter Russian sanctions on crypto transactions, will in the near future in the next 12 – 18 months result in an expanded more regulated sector with greater competition particularly between exchanges and tighter profit margins than in the past.” Speaking after his expert contribution to Crypto Expo Dubai, Lian suggested this meant that decentralized exchanges, and privacy platforms, will be more clearly separated from the mainstream than in the past. “What does this mean for mainstream exchange service and offerings? The bottom line is that it’s got to be led by the needs of the community, by the exchange’s users,” he added.

How best to accomplish this community involvement is clearly still up for grabs. Notable are the remarks by Ethereum’s co-founder Joseph Lubin who has questioned the longer term viability of Solana, which in his eyes pays overly generous rewards to users validating transactions on the network, all backed up by generous VC cash. Solana needs to “figure out a more sustainable business model for the network”, Lubin said. In response to Lubin’s criticism, Solana Labs, said that “simply looking at protocol revenue doesn’t tell the full story of the long-term performance” of a blockchain’s economic model. Figuring out the economic model for crypto businesses, faced with new regulation and Russian sanctions, whether decentralized or centralized, is key to the future of the long term future of the crypto sector.

Speaking on the panel ‘Why are crypto exchanges still flourishing?’ at Crypto Expo Dubai on March 16 Lian warned: “I believe being regulated is a very good thing, it’s the reason I invested my time in giving cryptocurrency and blockchain advice to government over the years. But the thing is we also have to understand the other side of the crypto startup equation which is innovation; if we kept ourselves solely in the sandbox environment, in a closed regulated environment it the real risk is the innovative decentralized aspect will be lost and we’ll end up with a centralized world.”

 

Original Source: https://www.securities.io/are-regulations-and-sanctions-driving-change-in-the-crypto-industry/

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Singapore’s crypto players face added scrutiny under new law

Singapore’s crypto players face added scrutiny under new law

SINGAPORE — Singapore on Tuesday passed a law that extends its cryptocurrency regulations to companies with a local presence that provide digital token services outside the city-state, as authorities further tighten rules around the emerging industry.

Lawmakers approved the Financial Services and Markets Bill 2022, which was brought up in parliament for debate on Monday. The law brings digital token service providers created in Singapore but who provide their services elsewhere under the purview of domestic regulators.

The legislation covers industry players who deal in Bitcoin, Ethereum and other digital currencies, facilitate their exchange or offer financial advice on the sale of these tokens, among other activities.

Crypto players operating in Singapore and serving the local market are already regulated by the city-state’s central bank. They are required by law to adhere to licensing requirements as well as be able to guard against money laundering and terrorist financing.

But those who do not provide digital token services in the city-state were not under the same oversight. The new law changes this, requiring all crypto players, whether they serve the local or foreign markets, to come under the same licensing requirements.

“Sad, disappointed — we went 10 steps backwards,” said a member of a crypto lobby group in Singapore who spoke on condition of anonymity. The source questioned the necessity of digital asset players with a base in the city-state being licensed if they do not target domestic consumers, which was a worry for the central bank. “So MAS [the Monetary Authority of Singapore, the city-state’s financial regulator and central bank] is making the assumption that the license is like gold — that everyone will want to get it?”

Alvin Tan, a board member of the MAS, explained the state’s reasoning to parliament on Monday.

“We could be exposed to reputational risks brought by digital token service providers created in Singapore, and which provide services relating to virtual assets such as Bitcoin outside Singapore,” he said. “The FSM Bill seeks to mitigate such risks by licensing these players and imposing AML/CFT requirements on them.”

Singapore is not alone in tightening its scrutiny of the booming crypto sector.

Last month, Thailand issued a ban against payments using cryptocurrencies and other digital assets in a bid to maintain stability in financial markets.

China has banned all cryptocurrency payments and services for disrupting the “economic and financial order.”

In 2019, Japan’s Financial Services Agency imposed stricter information technology requirements on licensed exchanges, following security breaches and hacking incidents that marred the industry.

In January, Singapore published a set of guidelines instructing crypto players to stop marketing or advertising their offerings to retail investors in public spaces, both physical and virtual, calling the trading of such assets “highly risky and not suitable for the general public.”

The law approved on Tuesday has also garnered some positive reactions.

Singapore-based Anndy Lian, chairman of Netherlands-registered crypto trading platform BigONE Exchange, told Nikkei Asia that the city-state’s enhanced regulations are “reasonable.”

“If you walk the ground hard enough, you will see many bad actors and dubious crypto companies using Singapore as a base of their operations,” he said. “We need to properly regulate things so that the bad actors won’t affect this industry’s image.”

Even before the new law hit the books, the MAS had been busy processing license requests. In January it said there were about 180 applications for permits, more than 60 of which were withdrawn or rejected. Only a handful of applicants were successful, though others were awaiting the central bank’s decision.

With the tightened regulations, the central bank is poised to sift through a batch of additional license requests as Singapore-based crypto players that mainly deal overseas are now required to meet the state’s standards if they want to use the city for their operations.

In March, Singapore-based payments company Digital Treasures Center, which provides a platform to facilitate cryptocurrency transactions, said it received in-principle approval from MAS to provide digital payment token services.

Desmond Yong, its chief strategy officer, told Nikkei that crypto players will need to devote additional resources to monitor foreign transactions so as not to run afoul of the new law.

“For companies that are unable to fulfill the AML/CFT requirement, they will need to move out to other countries,” he said. “But with more governments regulating cryptocurrency in different jurisdictions, these companies will soon find it hard to operate.”

 

Original Source: https://asia.nikkei.com/Spotlight/Cryptocurrencies/Singapore-s-crypto-players-face-added-scrutiny-under-new-law

 

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j