CoinGecko: the daily trading volumes at Indian crypto exchanges ZebPay, WazirX, and CoinDCX fell 60%-87% after the 1% transaction tax took effect on July 1
Sidhartha Shukla / Bloomberg :
Context & Ripple Effects
The 1% transaction tax lands on an already shrinking market: after India's 30% tax on crypto trading profits briefly legitimized the industry and lifted usage in February, at least seven firms had suspended rupee deposits by April while CoinGecko measured volumes down 88%-96% from their 2021 peak (seven crypto firms suspend rupee deposits).
The new levy adds a per-trade cost on top of that squeeze, and the trajectory it sets is visible in later coverage: Indian exchanges went on to lose 81% of trading volume between July and October 2022 as traders moved to foreign platforms (Indian exchanges lost 81% of trading volume).
First-order effects
- ZebPay, WazirX, and CoinDCX lose 60%-87% of daily volume overnight, directly cutting fee revenue on every rupee pair they list.
- Active Indian traders now pay a 1% deduction on each transaction regardless of profit or loss, making high-frequency strategies uneconomic on domestic venues.
Second-order effects
- Volume migrates to foreign exchanges outside the tax's reach, so the levy taxes a shrinking onshore base rather than raising proportional revenue.
- With deposits already suspended at seven firms and liquidity thinning, Indian exchanges face a further squeeze on market depth just as costs per trade rise.
Third-order effects
- If the pattern holds, enforcement becomes the policy lever: India's later blocking of nine offshore platforms — which pushed WazirX deposit inflows up roughly 250% — shows capital controls being used to push taxed activity back onshore.
- The episode becomes a template case in how transaction-level crypto taxation can hollow out domestic venue liquidity faster than it generates fiscal gains.
The trend: India's crypto market is caught between taxation that pushes traders offshore and enforcement that pulls them back, with exchange volumes rising and falling on each policy move rather than on demand.