India's Crypto Spot Trading Drops to 20%
In India's local CEX trading volume, futures and perpetual contracts account for over 80%, with spot trading remaining at about 20%; since 2022, a 1% TDS withholding tax has been imposed on spot sales, with a final tax rate of 30% and losses not allowed to offset other gains.
Currently, there are no similar TDS rules for futures and perpetual contracts, with some platforms offering leverage up to 100 times, and typical traders executing over 50 trades per month; platform data shows that 70%-80% of derivatives participants incur losses.
Market mechanisms indicate that tax rules drive funds from spot trading to high-leverage derivatives, benefiting event-driven small platforms and futures liquidity providers, while compliant spot traders face pressure, and tax authorities shift focus to high-risk speculative behaviors.
Source: Public Information
ABAB AI Insight
After India introduced a crypto tax framework in 2022, the activity level of spot trading has significantly declined, similar to cases in emerging markets where high tax burdens drive funds to gray or offshore channels; this rule shifts trading behavior from spot to leveraged derivatives.
In terms of capital flow, traders are turning to futures to avoid TDS and non-deductible losses, concentrating platform resources on high-frequency, high-leverage products, motivated by the need to maintain trading volume through amplified volatility, which actually increases systemic risk exposure.
Similar to other high-tax jurisdictions in crypto regulation, the Indian crypto market is transitioning from spot dominance to speculative derivatives, with a 70-80% loss rate reflecting the loss amplification effect of leverage.
This essentially represents a regulatory change; the original intention of the tax design was to increase transparency, but it has resulted in unintended substitutions, as the withholding and non-deductibility raise friction costs in spot trading, concentrating capital in low-regulation, high-leverage products, exacerbating market speculative attributes and potential systemic risks.
ABAB News · Law of Cognition
Heavy spot taxes, wide futures doors, funds always flow to low-friction areas.
Want to capture records, reverse leverage, regulation often diverges from its original intention.
70% losses, 100 times leverage, gamblers go crazier after taxes.