Crypto Tax: Excessive Taxation Could Drive Crypto Traders To Gray Market, Says CoinSwitch’s Ashish Singhal

“Just for the record, we have not closed withdrawals and we will not close withdrawals unless there is a banking channel issue rather than a creditworthiness issue at CoinSwitch. We will continue to operate normally as we operate. today,” says Ashish Singhalco-founder and CEO, CoinSwitch



The world is in risk-free mode when it comes to cryptos. You also had to tackle the 1% TDS from July 1st. There is also a 30% crypto tax. Volumes were down, but overall I imagine volumes are down again. Give us an idea of ​​what is happening on your platform? How much are the volumes down?
So 1% TDS has certainly had an impact on the trading volume on the platforms in India, but the important question is whether users are trading less frequently or whether trading has shifted to the gray market. In India, the exchanges are KYC compliant and the platforms are TDS compliant with increased transparency to help users with their annual returns. We said that taxation is good for an industry, but excessive taxation could drive users away from compliant crypto exchanges and I think that is what we are seeing in the market today.

The purpose of the TDS was to establish a trail of crypto transactions that exchanges are willing to comply with. The same can be achieved with a lower TDS hold that incentivizes users to stay on KYC-compliant exchanges and within regulations. But what we’re seeing now is that user trading volume could be moving into the gray area, into non-compliant exchanges, which actually hurts user protection. User protection and tax compliance can co-exist as long as there is enough tax incentive for users to stay on KYC-compliant platforms.

Give us an idea of ​​the drop in trading volumes, whether it’s CoinSwitch, WazirX or a CoinDCX? Before the TDS came into effect, they were talking about a drop in volumes of almost 70%. What about now – 80%, 90% because the prices are not supporting?
Ashish Singhal: Exactly. It is therefore difficult to say what is the contribution of taxation and what is the contribution of the market. What we’re seeing on the stock exchanges is about a 40% to 50% drop, but some of that could also be market conditions. But part of it was certainly contributed by taxation.

You tweeted how different and differentiated you are from other crypto exchanges because you don’t offer interest on cryptos, you don’t allow loans on cryptos and like I said you don’t you haven’t gone the route of authorizing non-fungible tokens anyway. I’m not saying NFTs are bad, you’re still trying to stay focused. How should a depositor identify an exchange because not in India but possibly overseas it is disclosed that they can stop withdrawals if there is a run on the exchange?
It’s just. Regulations facilitate this path and until these regulations come into force, users should consider the credibility of these exchanges. What products do they offer rather than looking at someone offering 20% ​​interest on your deposits. Watch how they generate this interest, look behind the scenes at what risks they pass on to users while providing great rewards. This is why CoinSwitch has stayed away from these products and has always been transparent with its users to define what we do, how we do it and what the users’ responsibility is in these scenarios.

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Users must therefore understand the platforms with which they invest. There are credible companies. Choosing the right products to invest in, understanding the underlying risk of any crypto product they use on any exchange or any platform is important for investors. These are some of the things a user can do before the regulations are in place, but ultimately the regulations have to be there. Regulations should ensure that every business that enters this space follows certain rules and regulations ensuring that it protects its users to the best of its ability. The end solution is regulation, but until we get there, user education is a must and users must also make that effort to understand what they are getting into and who they are investing their hard-earned money with.

You have also decided that on your platform you are not going to have the highly speculative non-fungible or NFT tokens. As a platform, you have also stayed away from leverage and lending against cryptos as much as possible. It must have been based on some kind of decision, some kind of thinking about how you’re going to survive in a down cycle?
Let me first say that it is not taxation that worries the crypto industry. It is mainly the TDS, which holds 1% of the total sale value, while in the stock market this percentage is 0.02% and that is why it does not harm stock investors, but investors cryptographic. This is the point of fear that we want to push through, which can equal the stock industry and give equal opportunity to all of these asset classes?

When it comes to the different business models of different companies in the crypto space, there are several business models and some are inherently more risky than others and obviously the proper execution of a business model can make or break a business. We see this happening over the past few weeks. Many crypto companies perished due to the insolvency that existed because they took a higher risk on the products they offered to their users.

CoinSwitch allows users to buy and sell cryptos for a low fee and this is our business model. We do not lend crypto, offer interest on crypto deposits or balances, or reinvest users’ crypto, ensuring the safety of users’ funds. And the user should also ensure that he chooses the right platforms when embarking on crypto investments without falling into the trap of lucrative offers that may be too good to be true in some cases. It is therefore essential at this stage to ensure that they are investing in the right company and that it is taking the right steps to reduce risk in the market.

Withdrawals have been suspended on a few platforms. I don’t know if CoinSwitch has. It would be nice if you clarify for us. Who will protect depositors? What happens to their money?
That’s a very good question by the way. For the record, we have not closed withdrawals and we will not close withdrawals unless there is a banking channel issue rather than a solvency issue at CoinSwitch. We will continue to operate normally as we operate today.

When the stock industry was created, I think similar problems plagued the stock industry as well. Today after 30 years, this regulation exists and that is why it is good for users and their protection. These are the same regulations that we have been asking for for years. The crypto industry is only 10 years old. It evolves and regulations must evolve with innovation.

We have all asked for the right regulations to be put in place to ensure such cases do not occur, that companies adhere to these rules and restrictions ensuring that users’ money is protected at all times and we we are all in favor of that. But this is a new innovation. We need to accept this fact and new rules and regulations need to be developed to protect users in the crypto industry as companies like ours take all the precautionary measures that we cannot guarantee everyone in the industry would do the same.

So while there may be 95% good players, 5% of players can do whatever they want to do. So to protect our users, we need to make sure regulations are in place that are equal for every business and make sure every business follows best practices that ensure user protection.