India adopted harsh crypto tax laws on Friday, and moments after the bill's passage Nischal Shetty, the CEO and founder of WazirX, one of India's biggest exchanges, pulled no punches, saying, "We have entered a period of pain."
"This is almost like not letting the industry function, and what will happen is what happened to the drone industry where eventually the largest drone industry is in China," said Shetty, perhaps the most prominent face in crypto in India. "Now all the foreign tech is going to dominate in India and we don't want that happening in crypto."
He added the move is especially bad for India's younger people. "What we care most about is our customers. Millions earn a living through crypto. During the [coronavirus] pandemic, they lost jobs and crypto was one of the reasons people survived. We are concerned about the loss to their livelihood, their dreams ... these are people in the 18 to 30-year-old category," said Shetty.
Shetty's biggest objection was to the 1% tax deducted at source (TDS), which would be levied any time an Indian buys or sells crypto. "The 1% TDS will kill liquidity, which means ultimately profitability goes down for everyone. It's a lose-lose," Shetty said.
What people will do now, according to Shetty, "is find ways to not be part of the [domestic] system because people are not going to leave crypto."
"This will push people to other channels – peer to peer, one-to-one trading. As an industry, we had worked so hard to make sure everyone comes through the right way, millions through KYCs [know your customer protocols]. Now the other fear is that this will go back to the gray market or non-KYC approach," Shetty predicted.
The move to not allow crypto losses to offset gains is even worse than the 30% capital gains tax on crypto profits itself, said Shetty. He noted that in some cases Indian investors could lose more money than they invested because of the way the new taxes work.
"No one will risk that," Shetty said.