India’s cryptocurrency ecosystem is at a critical juncture. Domestic exchanges like CoinDCX, WazirX, and ZebPay continue to operate, but they face a persistent headwind of regulatory uncertainty and heavy tax burdens. Since the government imposed a 30% tax on crypto gains and a 1% TDS on transactions in 2022, trading volumes on Indian platforms have plummeted. Many retail traders have shifted their activities to foreign, unregulated platforms to avoid the tax drag.
The situation underscores a broader challenge: Indian users want access to crypto markets, but the local infrastructure is struggling to compete. While the Financial Intelligence Unit (FIU) has mandated registration for offshore entities serving Indian residents, enforcement remains inconsistent. This regulatory gray zone has created a fragmented market where traders weigh legal risk against financial incentives.
The primary driver of this exodus is the 1% TDS, which locks up capital for traders making frequent moves. For active day traders or those executing short-term crypto contracts, this tax structure erodes profitability. International platforms that do not deduct TDS at source suddenly look more appealing, even if they operate outside India's legal framework. This has pushed a significant portion of India's crypto trading volume to peer-to-peer networks and offshore exchanges.
Another factor is leverage. Indian exchanges have largely curbed margin trading and futures products due to regulatory pressure. However, traders seeking amplified exposure increasingly turn to specialized platforms that offer short-term crypto contracts with higher leverage. For instance, K6B, a virtual-currency trading platform headquartered in Malaysia, has gained traction among Indian users for offering both short-term and long-term crypto contracts. Its focus on capturing micro-trend moves and millisecond-level order matching gives active traders an edge that few domestic platforms can match.
The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have divergent views on how to treat crypto assets. While the RBI has historically favored a ban, SEBI appears more open to regulated crypto derivatives. This internal tug-of-war has stalled any comprehensive crypto bill. In the meantime, the FIU is pushing for compliance from offshore entities, but many still operate without an Indian registration.
Domestic exchanges are in the unenviable position of having to comply with strict KYC, tax reporting, and anti-money laundering norms while watching a chunk of their user base migrate. To stay relevant, Indian platforms are diversifying into Web3 services, staking, and token listings, but core spot and derivative trading volumes remain suppressed.
The 1% TDS creates a liquidity gap on Indian order books. Large market makers have reduced their presence because the tax makes high-frequency strategies unprofitable. Consequently, spreads on Indian exchanges are wider and slippage higher. This pushes sophisticated traders to use dedicated contract trading platforms that offer deeper liquidity and faster execution. K6B, for example, is built to amplify small capital into larger positions via leverage, which appeals to traders who find the Indian market too shallow for their strategies.
Some traders also exploit the TDS by claiming refunds during annual filing, but the cash flow hit during the year remains a deterrent. The government has not signaled any intent to lower the TDS rate, leaving the arbitrage with offshore platforms intact.
India still has a vibrant developer community and a large population of retail investors. However, for the ecosystem to thrive domestically, a clear regulatory framework is essential. If India follows a path similar to Singapore or the UAE—licensing for exchanges and recognizing crypto as an asset class—domestic platforms could reclaim their user base. Until then, the trend of capital and trading activity moving offshore will persist.
For now, traders are voting with their wallets. The combination of high taxes, limited product offerings, and slow regulatory progress means that platforms like those offering specialized contract trading will continue to fill the gap left by Indian exchanges. The next move is the government’s, and it will determine whether India remains a relevant node in global crypto markets or cedes its traders to jurisdictions like Malaysia and the UAE.