As the recent tax imposition on crypto assets went live in India, we have seen a significant fall in the use of local crypto exchange platforms. On the cost of the local exchanges, foreign exchanges like Binance and FTX are now facing an increase in the user base. As per the report by Bloomberg, Binance is expanding its base in the Indian crypto market.
The report mentioned that the downloads of Binance's app in India increased to 429,000 in August. According to the data from Sensor Tower, the market intelligence firm, Binance has the highest number of downloads this year and surpasses the runner-up CoinDCX thrice its value.
With the recent levy of a hefty 1% TDS on crypto transactions, the Indian crypto exchange has suffered as the crypto traders are signing up on foreign exchanges to avoid this tax. This 1% transaction tax is levied in addition to the existing 30% tax payment systems on crypto gains.
The steep tax regulations on crypto gains in India and the hassles concerning moving funds in and out of trading platforms drive Indian crypto investors towards foreign exchange platforms like Binance. Since the 1% tax in July, the daily volumes at major India-based exchanges have slumped by 90%.
Low fees, diverse offerings, and a popular P2P marketplace that offers hassle-free movement between tokens and cash are some known factors that have enabled Binance to outmaneuver its competitors. However, another significant factor includes the difference in how the foreign exchanges and the Indian ones tackle the issue of this tax imposition on domestic residents.
While Indian-origin platforms have started to deduct the levied tax, certain foreign exchanges like Binance and FTX have not. This is an actively enticing factor for Indian investors to switch to foreign platforms.
source: Bloomberg Report
Rohan Misra, chief executive officer at SEBA India, a subsidiary of Swiss-based SEBA Bank AG, said,
"The recent tax regulation is not explicitly clear on whether the 1% tax deducted at source extends to crypto derivatives transactions involving futures, as it does to crypto spot transactions".
When asked whether Binance has started collecting the levied tax, a spokesperson replied that Binance "is currently monitoring the situation and will make further announcements in due course."
Concerning this situation, FTX decided to keep hush. At the same time, there was no response to emails seeking comment from the Ministry of Finance in India.
Binance is witnessing this gain amidst rare strife with WazirX, India's most popular crypto exchange. This sudden spat occurred after an enforcement directorate investigation statement of 5 August 2022. The ED mentioned that WazirX tried to evade the Indian regulatory agencies by giving ambiguous and contradictory answers.
"Despite giving repeated opportunities, WazirX failed to give the crypto transactions of the suspect fintech APP companies and reveal the KYC of the wallets. Most of the transactions are not recorded on the blockchain also."
This incident of the fallout between Binance and WazirX resulted in several WazirX customers moving to Binance. The monthly download of WazirX stooped from 596,000 in January to 92,000 in August. Moreover, the WazirX exchange is witnessing a further decline in the inflow of funds due to the banks suspending their associations with the firm.
Apart from Binance, other foreign exchanges also mark a certain increase in their user base. For instance, Sam Bankman-Fried's FTX download increased from 40,000 in January to 52,000 in August.