India’s leading crypto exchange CoinDCX has reported a 2000% increase in deposits from customers since the finance ministry issued a show cause notice to 9 major offshore exchanges, including Binance on December 28.
Offshore exchanges Binance, Kucoin, Huobi, Kraken, Gate.io, Bittrex, Bitstamp, MEXC Global, and Bitfinex were all served with show cause notice for not complying with local money laundering laws. The Financial Intelligence Unit of India had also asked the information technology ministry to block the URLs of these exchanges for operating illegally in India.
In a press release shared with CryptoNews, CoinDCX revealed that the exchange has experienced a 2000% increase in deposits since December 28.
CoinDCX co-founder and CEO Sumit Gupta reiterated exchange’s commitment to providing a secure and compliant investment environment for its users. He also added that the exchange is offering incentive to users who want to migrate their assets to CoinDCX.
1% TDS Blamed for Lower Trading Volumes
Since the implementation of 1% TDS (tax deducted at source) on crypto exchanges in India in July 2022, the trading volume of domestic exchanges fell as much as roughly 90%.
As reported earlier, between February 2022 and July 2022, three to five million Indian users shifted to offshore platforms, with a single offshore exchange reporting a staggering 450,000 sign-ups in the month following the TDS implementation in July 2022.
However, not all of those foreign exchanges were complying with the 1% TDS rule. Domestic crypto exchanges accounted for 97% of the collected TDS, contributing approximately $29 million (Rs. 250 crore), while trades by Indians on offshore platforms contributed only $840,000 (Rs. 7 crore), which is just 0.2% of the $420 million (Rs. 3,500 crores) that should have been collected.
With the recent show cause notice sent to offshore exchanges, all the platforms will have to implement the TDS or face ban from operating in India. Foreign exchanges have till 11th January to respond to the show cause notice.
Earlier, in an exclusive interview with CryptoNews, CoinDCX co-founder called 1% TDS a death blow to the industry.
Local Web3 Advocacy Body Urged Action Against Offshore Entities
It was reported earlier that the move by the Indian government to block the URLs of nine offshore exchanges and issue show cause notices was prompted by a formal request made by the advocacy body of the Indian crypto and Web3 association.
The letter, dated December 16, originated from Dilip Chenoy, the Chairman of the Bharat Web3 Association (BWA), and was directed to Sanjay Malhotra, the Secretary of the Department of Revenue within the Indian Finance Ministry. CoinDCX and other local exchanges are members of the Bharat Web3 Association.
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