The implementation of 1% tax deducted at source (TDS) on crypto transactions from July 2022 has done more harm than good for crypto players in India, reducing domestic trade volumes by 90%, and the Centre must consider reducing the same to 0.01% to prevent investors from moving towards foreign exchanges, CoinDCX co-founder and CEOSumit GuptatellsPiyush Shuklain an interaction. Excerpts:
What is your representation to Centre on 1% TDS?TDS was introduced in February 2022 and implemented in July. After that domestic players saw a 90% decline in volumes. India came number one in terms of adoption, whereas $32 billion of the $34 billon of projected volume shifted offshore. So, high TDS did not solve the problem which it ideally should… the government should ideally revise TDS to 0.01% as anyway it is a refundable tax and government will have more visibility as volumes rise.
Your outlook for 2024?Globally, there is a very strong combination of high demand and less supply coming up. We are nearing a stage where Bitcoin, Ethereum ETFs (exchange traded funds) will soon be allowed in the US. When that happens there will be high demand from both institutions and high networth individuals (HNIs) as well as ultra HNIs. In April 2024, there will also be a Bitcoin halving event which will shorten the supply.
What has been the impact of AML framework on Indian exchanges?Impact has overall been positive, and it has increased compliance cost for us. Capital is being allocated towards building processes, resources and tools. But, it is a good expense and positive investment. Secondly, it is important that if anyone is operating in crypto space in India and dealing with retail customers, they need to set higher standards. At CoinDCX, we are FIU registered and only crypto player to have ISO certification of 2022 standard.
Are you seeing investors diversifying into other cryptocurrencies than Bitcoin?If you talk about last year, when Dogecoin was new and Elon Musk started talking about it, people bought in that asset class. I do not think these things should happen where prominent people say things (and influence price). We believe in responsible growth. Majority of people in this space invest in Bitcoin, and it will continue to be so as ecosystem gets more mature. Of course, they may park 5% of capital in other crypto assets just to learn but we know that 95% of people know importance of Bitcoin, Ethereum and blue-chip stocks and that is the direction where things are headed… the average age of our investor base was 25 in 2022 and 30 in year 2023, showing lower risk appetite.
Does Bitcoin has the potential to reach November 2021 all-time high of $68,789.63 apiece?I am bullish on Bitcoin but I do not want to give a price prediction. But 2024 will be a year of quality assets, virtual digital assets (VDA) and so on. Now that finance minister Nirmala Sitharaman has said crypto should not be referred to as currency but as an asset class, that one clarification will be important for us to educate people.
Prominent crypto leader and Binance founder CZ pleaded guilty of money laundering violation and paid $50 million fine to the US government. Does this dent investor trust in crypto?Binance as a company continues to serve customers globally. Sometimes, companies are not fully compliant with local norms, like in India many exchanges do not comply with TDS norms. Therefore, penalising such players on non-compliance is a positive move. Whether CZ is there or not, people ultimately trust organisation and the brand. People will now take compliance very seriously.
Will you diversify into other asset classes like Coin Switch?We will not. People may say we have an uncertain regulatory environment but it was worse five years back. I had the same level of conviction five years back and have more conviction today. There is a lot of work to do in crypto industry itself so why should we diversify into other asset classes and other products. If we do not solve problem as an industry then who will.