Indian Survey Reveals Impact of Crypto Taxes and Anti-Money Laundering Rules on Investors

As a seasoned crypto investor hailing from the bustling tech hub of Bengaluru, I’ve witnessed firsthand the ebb and flow of the digital currency market in India. The latest findings by Esya Centre have once again brought to light the need for a more balanced approach towards crypto taxes and regulations in our country.

According to a recent survey conducted by a tech-focused policy research group based in New Delhi, it might be beneficial for India to reassess its taxation on cryptocurrencies instead of solely relying on anti-money laundering regulations to offset the effects of high taxes associated with these digital assets.

According to research conducted by the Esya Centre, it was discovered that a significant number of Indian investors (approximately 58% and 52%, respectively) understand regulations regarding cryptocurrency taxation and money laundering. Interestingly, a vast majority (93%) of these investors expressed a preference for collateralized stablecoins over their algorithmic counterparts.

In March and April, a study was carried out across five major cities – Ahmedabad, Bengaluru, Delhi, Jaipur, and Lucknow. This research targeted 1,342 individuals who are well-educated as its primary focus.

The research indicates that India’s anti-money laundering legislation appears to have resulted in a preference for equity investments over cryptocurrency investments, with an increase of approximately 8%.

For a year now, cryptocurrency operations in India have been mandated to register with the Financial Intelligence Unit (FIU), which is the nation’s anti-laundering agency, in order to adhere to regulations outlined by the Prevention of Money Laundering Act (PMLA).

In contrast to research suggesting a decrease, India has maintained the same high tax rates for cryptocurrencies, which they initially implemented in 2022.

Esya’s recent study reveals that a better understanding of tax laws significantly boosts investments in cryptocurrency by about 10%, and also encourages investments through overseas crypto platforms by approximately 15%.

The trend experienced a partial shift when India halted operations for up to nine overseas trading platforms, some of which have since legally established their presence within the country.

The study revealed that certain Indian investors were finding ways around the URL blocks imposed by offshore trading platforms, indicating that current anti-money laundering rules might not be robust enough to counterbalance or mitigate the effects of tax laws.

Therefore, the research group emphasized their recommendation for the government to “think about modifying the tax regulations concerning cryptocurrencies to deter offshoring” and that “future efforts by the government to encourage responsible participation in the cryptocurrency market should involve discussions with cryptocurrency exchange platforms.”

All the respondents considered crypto assets to be very attractive as an “additional investment opportunity and for cross-border transactions,” while NFTs and stablecoins were “not perceived as similarly lucrative.”