The cryptocurrency tax introduced by India’s government has caused foreign exchanges like Binance to consolidate their market share there.

The Binance app was the only one among the top exchanges that achieved higher downloads last month than in July, according to data from market intelligence firm Sensor Tower.

Almost triple the amount of runner-up CoinDCX, downloads of the Binance app in India amounted to 429,000 in Aug., the highest so far this year.

However, the operator of the world’s largest crypto exchange is rather an exception to the prevailing market conditions, where competitors have been stymied by the difficulty of moving money in and out of trading venues, in addition to the recent tax burden.

Since the 1% tax on crypto transactions, known colloquially as the TDS, was introduced in July, daily volumes at key India-based platforms have plummeted 90%. 

Although Binance offers a variety of more unique features, such as easier exchange between tokens and cash, the crypto tax is truly at the crux of its success.

While many Indian-origin platforms have begun deducting the levy, other foreign rivals such Binance and FTX have not. This prompted many to make the switch to their platforms, according to anonymous Bloomberg sources.

As traders are drawn by what may be perceived as a loophole, others may be drawn to whether the law applies to more complex transactions.

“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,” said Rohan Misra, chief executive of Swiss-based SEBA Bank’s Indian subsidiary.

Regarding whether Binance had started collecting the levy, a spokesman said it “is currently monitoring the situation and will make further announcements in due course.”

According to Anoush Bhasin, the founder of crypto asset tax advisory firm Quagmire Consulting, when an exchange doesn’t set aside the levy, the responsibility then falls on the seller of the digital token.

On top of the TDS law came a new 30% tax on gains from the transfer of crypto assets earlier this year, much higher than most other jurisdictions. The rules introduced this year also prohibit offsetting crypto trading losses against income.

Yet, as Binance has managed to flourish, the introduction of the tax has taken its toll on most other exchanges operating in India. For instance, Coinbase Global, which said it is complying with the crypto transaction tax rules, saw downloads in India fall from almost 31,000 in June to 16,000 in Aug.

Runner-up CoinDCX dropped from 2.2 million downloads in Jan. to 163,000.

Meanwhile, FTX, which reportedly had not started deducting the levy, also saw downloads in India drop from 96,000 downloads in India in July to 52,000 in Aug. Another reason for Binance’s boost may be some publicity from a recent scandal. 

Amid an investigation following the suspension of withdrawals on WazirX, Binance distanced itself from the domestic exchange, saying it had never followed through with acquiring it, which had been announced in 2019.

This led Binance CEO Changpeng Zhao to encourage WazirX customers to defect to Binance, with WazirX’s monthly download tumbling to 92,000 in Aug. from about 596,000 in Jan.

The post Binance Booms as Crypto Tax Crushes Indian Exchanges appeared first on BeInCrypto.

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