Call for Action: India's Advocacy Body Urges Response Against Offshore Entities in the Local Crypto and Web3 Space, Reveals Source

In a significant development for India's crypto landscape, Bharat Web3 Association (BWA) Chairman, Dilip Chenoy, took proactive measures by addressing a letter to the Indian government on December 16. The communication urged decisive action against offshore exchanges, sparking a series of events that have implications for the country's crypto industry.

Offshore exchanges found themselves in the spotlight as show cause notices were served, accompanied by a strict two-week response window. This move follows the persistent advocacy of a level playing field by industry figures such as Rajagopal Menon, Vice President of WazirX, one of India's prominent crypto exchanges.

BWA's engagement with the Finance Ministry sought not only punitive measures but also a reasonable grace period. The letter requested a one-month window for offshore exchanges to register with India's Financial Intelligence Unit (FIU), housed under the Finance Ministry. However, the government's subsequent actions, involving the blocking of URLs and issuance of notices, indicated a direct response to BWA's concerns, particularly regarding tax regulations.

The letter underscored the importance of offshore exchanges establishing a presence within India and adhering to local tax regulations. Non-compliance with these regulations could result in severe consequences, including restricted access on app stores and IP blocking.

This situation sheds light on the persistent challenges faced by Indian crypto exchanges, grappling with stringent taxation measures. The tax landscape, marked by a 30% tax on crypto profits and a 1% tax deducted at source (TDS) on transactions, has triggered a migration of transactions offshore. This phenomenon prompted a think tank to estimate potential revenue losses of $420 million since the rules were introduced in July 2022.

While the BWA's letter is not singularly responsible for the government's actions, it is evident that concerns about fairness and market stability underpin these developments. The call for a 30-day withdrawal period for Indian retailers further emphasizes the desire for a balanced regulatory environment.

Industry leaders stress the urgency of addressing the 1% TDS issue as a crucial factor in sustaining business viability. They argue that resolving this matter is pivotal not only for the financial health of crypto exchanges but also for fostering a secure Virtual Digital Assets ecosystem in India. As the regulatory landscape evolves, the crypto community awaits further developments that will shape the future of digital assets in the country.

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