India's new cryptocurrency tax has dealt a heavy blow to the country's crypto exchanges, adding to broader sectoral woes and sending trading volumes plunging by up to 90%.
The 1% tax on Indian cryptocurrency trades from the start of this month has been a further disincentive for investors in a market where a burdensome regulatory regime and a 30% digital income tax had already knocked volumes by 60-70%, traders and industry executives said.
"We are scraping the bottom of the barrel as far as volumes are concerned," said Rajagopal Menon, vice president of the WazirX crypto exchange.
"The amount of regulatory tangles, lack of ease of doing business and paperwork that has been created on every single trade has made investors and traders wary and we are seeing that people are moving to international exchanges or to the grey market."
While Indian exchanges have been hit, trading volumes globally have edged higher as prices of cryptocurrencies have come down.
Top-tier exchanges traded a maximum daily volume of $137 billion when the bitcoin price fell sharply on May 11, up 84% from April, specialist research company CryptoCompare said in a report.
Bitcoin, the world' largest cryptocurency, has had the worst quarter on record, with the price down 56% and the outlook still challenging..
Lower trading volumes have dragged down revenues for Indian exchanges, which have cut back on marketing and hiring while formulating strategies to ride out any protracted downturn.
"Several companies are laying off people after hiring a huge number last year and now have to look at operational and other corporate cost-cutting measures," said Kumar Gaurav, founder of digital bank Cashaa.
The recent woes for the Indian crypto exchanges could also prompt consolidation, some executives have said.
"A bear market is a cleansing process and weak businesses will perish while companies with the right business model will emerge stronger," said CoinSwitch CEO Ashish Singhal.
(Reporting by Nupur Anand Editing by David Goodman)