Foreign media reports that WazirX co-founder Nischal Shetty recently stated that India's current 1% crypto TDS is draining market liquidity and driving active traders to overseas platforms. He believes that for locally compliant trading platforms to continue to thrive, taxation and regulation need to be clearer.

Taxation has dampened trading activity.

Shetty said he hopes India will either abolish TDS or reduce the tax rate to around 0.01%. He believes the 1% withholding tax will continuously drain funds from each transaction, particularly affecting active traders. The inability to effectively hedge losses also hinders market depth and price discovery in India.

Transactions shift to overseas platforms

Shetty believes that the tax burden hasn't stopped Indians from trading crypto assets; it has merely changed the trading venue. He states that the current environment encourages users to migrate to overseas platforms rather than staying on compliant platforms that register locally and complete KYC and AML procedures. Meanwhile, India's recent moves regarding reporting standards and FIU guidelines indicate that regulators are still building a complete framework.

Stablecoins and RWA are seen as the next step.

In his view, stablecoins will become a crucial entry point for crypto applications in India, suitable for payments, remittances, and settlements. Shetty also mentioned that with a transparent, auditable, and regulated INR stablecoin, businesses could settle transactions in rupees more directly on-chain. Regarding the tokenization of real-world assets, he believes government securities, bonds, gold, and commodities are more likely to be the first to be implemented.

Additional information:Shetty also mentioned that the Indian Parliament's Finance Committee meeting on May 20, and the invitation to WazirX, Binance, and ZebPay to participate in research on virtual digital assets, are all signs that regulation is becoming clearer.