Indian Crypto Exchanges Push Tax Changes as Traders Flee Offshore

Indian crypto exchanges want tax reform. The industry’s basically screaming for the government to cut the brutal 30% crypto gains tax and that nasty 1% transaction fee that’s killing domestic trading volumes ahead of the February 1 budget announcement.

Trading volumes on Indian platforms crashed over 70% in 2025, and it’s pretty clear why. The current tax setup is driving traders to Singapore, Dubai, and other crypto-friendly countries where they can trade without getting hammered by taxes. Domestic exchanges are bleeding liquidity fast, and offshore platforms are laughing all the way to the bank. Nischal Shetty from WazirX said traders are moving operations to countries with better tax deals, which means India’s losing control over crypto transactions. Not good.

The numbers don’t lie here.

Local exchanges can’t compete with offshore platforms that offer lower taxes and fewer headaches. Some Indian exchanges are thinking about moving their whole operations abroad, which would be a disaster for India’s position in the global crypto market. Without competitive tax rates, keeping talent and capital in the country becomes nearly impossible, and that’s exactly what’s happening right now.

Industry leaders want the transaction tax reduced and a complete rethink of the capital gains structure. They’re arguing that reasonable taxation would keep investors in India’s financial system and boost local economic growth. But the Finance Ministry hasn’t said a word about potential changes in the upcoming budget, leaving everyone hanging.

The regulatory mess makes things worse. India’s crypto sector has dealt with uncertainty since the RBI’s 2018 banking ban, which the Supreme Court overturned in 2020, but the legal status of cryptocurrencies remains murky. Traders are getting frustrated with the lack of clarity.

Things got interesting recently.

On January 15, the Blockchain and Crypto Assets Council issued a statement telling the government to wake up to the economic damage from current tax policies. The council pointed out that other countries are racing ahead with crypto-friendly policies to attract global talent and investment, leaving India in the dust. Rajat Gupta from Crypto India Research noted that peer-to-peer crypto trades are surging as traders try to dodge the heavy tax burden, which hurts exchange revenues and reduces transparency of financial flows.

RBI Governor Shaktikanta Das said on January 20 that the central bank still worries about crypto risks but admitted they need a regulatory framework that balances innovation with investor protection. He hinted at possible future discussions, which gave some hope to industry players who’ve been waiting for any positive signal from regulators.

The government held a closed-door meeting with crypto industry bigshots on January 25. Representatives from CoinSwitch Kuber and ZebPay showed up to discuss the tax mess and potential regulatory changes. No official statements came out, but insiders say the talks focused on tax reforms and regulatory adjustments that could help domestic exchanges compete again.

The Confederation of Indian Industry submitted a report on January 28 recommending gradual tax reductions. The report argued that slowly cutting the transaction tax could bring back domestic trading activity and cited examples from other countries that successfully boosted their crypto sectors with similar strategies. Finance Minister Nirmala Sitharaman met with officials from the Ministry of Electronics and Information Technology on January 29 to explore digital asset frameworks and how crypto could fit into India’s economic strategy.

Meanwhile, exchanges are preparing for different budget scenarios. Some are exploring partnerships with global platforms to offer more competitive services if tax reforms don’t happen. The anticipation is killing everyone in the industry right now.

Offshore exchanges keep benefiting from India’s tax exodus. Singapore and Dubai are becoming go-to destinations for Indian traders who want lower taxes and less regulatory hassle. Local exchanges are struggling to keep up, and without changes, this trend will probably get worse.

The crypto community hopes the government will listen to their concerns when the budget drops. A positive shift in tax policy could revive domestic exchanges and restore trader confidence. But without reform, more traders will keep moving offshore, weakening India’s crypto market presence even further.

For now, everyone’s waiting for February 1. The Finance Ministry still hasn’t commented on potential tax reforms, and the silence is making investors and exchange operators pretty nervous about what comes next.

The crypto tax burden has created a stark competitive disadvantage for Indian exchanges compared to regional rivals. Singapore imposes zero capital gains tax on crypto trading for individuals, while the UAE offers complete tax exemption for crypto transactions. These jurisdictions have seen massive influxes of Indian crypto capital, with Dubai’s Virtual Assets Regulatory Authority reporting a 340% increase in Indian crypto business registrations since India’s tax implementation.

Major Indian exchanges are hemorrhaging market share to international competitors. Binance and other global platforms now handle an estimated 60% of Indian crypto trading volume through offshore routes, according to blockchain analytics firm Chainalysis. WazirX’s daily trading volumes dropped from $50 million to under $15 million between 2024 and 2025, while CoinDCX reported similar declines that forced staff reductions across multiple departments.