As one percent TDS came into force from July 1 onwards, several crypto investors have become too dissuaded to invest their money, or at least the data shows this. No prizes for guessing then the trading volumes at several Indian crypto exchanges have dropped sharply.
Co-founded by Darshan Bathija, Singapore-based crypto platform Vauld recently suspended its withdrawals, trading and deposits.
The news of pausing of withdrawals followed an announcement recently that Vauld was firing 30 percent of its staff last month.
What went wrong?
Vauld said that the suspension of withdrawals was the result of massive customer withdrawals amounting to over $197.7 million since June 12, 2022.
The company on Tuesday announced that there could be a solution in sight as Nexo, lender in digital finance space, starts the process to acquire Vauld.
"I understand that a lot of our customers are nervous about your funds. We are working tirelessly to ensure your financials are protected. To that end, we've signed an indicative term sheet with Nexo to acquire up to 100% of Vauld," said Darshan Bathija in a statement issued on Tuesday.
About Vauld discontinuing the withdrawals, Gaurav Mehta, Founder of Catax, says: "It illustrates the sorry state of affairs in India, where fintech innovation and risky endeavours are shielded by corporate restructuring abroad and Indian customer’s investments is a mercy for foreign companies."
What can investors do now?
This sudden move caught a number of investors unaware. Puneeth-K, one of the user on reddit, a social news discussion portal, said, “Learnt my lesson after losing lakh worth of coins on a good day (seems so long ago now) but never again falling for advices from YouTubers they are just cynics aiming to make cash,”
Another one that goes by the name Koal2 says: "So we won't get any money back?"
On this, Vauld says that investors need to be understanding and patient for some time. If some customers have a query, they can send them to enquiries@ vauld.com.
The company says that specific arrangements will be made for customer deposits as may be necessary to meet margin calls.
“We seek your understanding and patience in the meantime. Should you have any queries, please submit them at enquiries@vauld.com. We will endeavour to address them as soon as practicable,” a Vauld statement says.
Why are investors exiting crypto markets?
Most Indian crypto exchanges have witnessed noticeable decline in their volumes soon after the 1% TDS came into effect. This means for every purchase, they need to earmark one percent of their price and pay as tax. This was seen to impact adversely the overall crypto market.
According to the data shared by CREBACO, a crypto research firm, the trading volumes have dropped by as much as 72.5 percent for WazirX, while other crypto exchanges witnessed the volumes sliding by anywhere between 29 percent to 41 percent in mere four days.
| Date | Wazirx | Coindcx | Bitbns | Zebpay |
| June 30 | $10,282,883 | $2,619,275 | $9,003,574 | $2,862,064 |
| July 1 | $3,614,101 | $2,092,710 | $8,743,223 | $1,209,285 |
| July 2 | $1,933,488 | $2,113,775 | $7,220,362 | $700,351 |
| July 3 | $1,762,569 | $787,854 | $7,335,342 | $693,847 |
| July 4 | $2,827,101 | $1,538,740 | $6,324,253 | $1,727,135 |
| Drop in volumes | -72.51% | -41.25% | -29.76% | -39.65% |
(Source: CREBACO)
Mehta believes that this drop in volumes will continue to happen for some more time.
"It is projected that the impact will persist over the following months, and revenues for exchanges will continue to drop, adding to market collapse pressure. Positively, we have entered an era of genius price discovery in which investors will treat cryptocurrency more as digital assets as a result of the reduction of trade noise," he says.
What is the way forward?
Although series of tax moves have given a setback to cryptocurrency investors in crypto exchanges across India, but some industry experts and entrepreneurs believe that this is transient.
Ashish Singhal, co-founder of Coin Switch Kuber says, "Crypto industry has several business models. Some are inherently riskier than others and can come undone, as recent events have shown. Right execution of business models can make or break a company."
He adds, "CoinSwitch enables users to buy & sell crypto for a small fee. That's our business model. We do not lend crypto, offer interest on crypto deposits or balances, or reinvest users' crypto. However, we are a user-centric company & we continuously listen to our users’ asks."
Catax's Gaurav Mehta, too, is hopeful of the future of cryptocurrencies in India.
"Markets are resilient and it's only temporary hiccup. Now it is apparent that the majority of trading activity on the cryptocurrency market was conducted by speculators, day traders, bots, and liquidity providers, and that TDS intervention has eliminated them," Mehta says.