National Startup Day Sparks Urgent Plea from CoinDCX Chief to Indian Government and Web3 Community
National Startup Day Insights: CoinDCX’s Sumit Gupta Sheds Light on Critical Challenge Hindering Crypto Sector Growth in India.
India’s startup ecosystem has firmly established itself as the third-largest globally, boasting over 99,000 recognized firms, including 108 unicorns. However, despite this success, challenges within the Web3 ecosystem have come to light, impeding the overall growth of this sector. As the nation marks National Startup Day on Tuesday, January 16, Sumit Gupta, the founder and CEO of CoinDCX, has illuminated a critical issue that he believes is hampering the growth of the crypto sector in India.
Gupta pointedly attributes the slowdown to India’s one percent TDS (Tax Deducted at Source) reduction law applied to each crypto transaction. In a candid statement, he expressed concern about the impact of this taxation policy on the Web3 ecosystem’s potential for growth.
“Despite our remarkable progress, with over 112,718 DPIIT-recognized startups and a staggering $42 billion (roughly Rs. 3,48,555 crore) in funding in 2022, why does the Web3 sector face such daunting challenges due to the current TDS regime,” Gupta posted on X, highlighting the urgency for addressing and rectifying this issue to foster a more conducive environment for the crypto sector in India.
In 2022, when India was levying taxes over crypto incomes and transactions, the Finance Ministry said it was aiming to keep track of otherwise largely anonymous crypto activities. In India, crypto gains are taxed at 30 percent and each crypto transaction sees a one percent tax deducted at source (TDS). Soon after these laws were deployed last July, the average daily transaction volume on Indian exchanges WazirX, CoinDCX, BitBNS, and Zebpay dipped significantly – never to rise notably again until recently.
In its latest study, Delhi-based think tank Esya Centre has advised the government to slash its 1 percent TDS on crypto transactions to 0.01 percent. In doing so, India could garner more revenue from the Web3 sector than what it’s managing to churn at present while also supporting the growth of this up-and-coming sector, the report said.
Despite constant criticism of this one percent TDS law on each crypto transaction, India has not changed its stance on the matter.“The introduction of VDA taxes in 2022 led to a disheartening brain drain of Web3 talent from India. This distressing exodus, primarily driven by harsh taxation treatment represents a formidable barrier that locks up crucial capital and stifles liquidity, both vital for growth and innovation in the Web3 space,” Gupta noted.
On a global level, the number of crypto venture capital deals witnessed a deceleration in 2023. A total of 1,819 deals were reportedly finalised in the crypto-startup arena — marking a 32 percent decrease from the 2,671 deals recorded in 2022.
As per a report by AltIndex, crypto startups raised $2.1 billion (roughly Rs. 17,427 crore) globally in 2023, clocking a decline of 80 percent compared to 2022. In order to foster the sector’s growth, the India Blockchain Forum has also announced the launch of a Web3 Ecosystem Directory.
“With the launch of the Web3 Ecosystem Directory, we are paving the way for the seamless growth and adoption of the blockchain industry in India. We extend our invitation to startups, entrepreneurs, enterprises, academia members, students, and developers to come together and propel India’s Web3 growth story,” the India Blockchain Forum said in its official announcement.
