It wasn't until 2017 that India started cracking down on crypto exchanges and sending notices to investors who made money from Bitcoin and other cryptocurrencies.

In April 2018, RBI banned all Indian banks from holding or facilitating cryptocurrency transactions. This ban lasted for two years, resulting in India's first crypto brain drain. Vauld, India's oldest crypto exchange, left India for Singapore in 2018 - the following year, CoinDCX, registered in India since January of 2018, registered a Singapore entity, and Matic Network, a big-time Ethereum Layer 2 scaling solution now called Polygon, left India for Dubai.

That ban was overturned by the Supreme Court in 2020, but it didn't make crypto legal, so people were confused. And in early 2022, the Indian government announced a tax on crypto transactions, recognizing crypto as an asset class.

During the 2022 Union Budget, India's Finance Minister said the government would levy a 30% tax on any income generated from the transaction of virtual assets including cryptocurrencies and NFTs. It's also imposing a 1% at source tax, or TDS, and the weird thing is that losses can't be offset against profits for this new taxable asset class.

After these tax laws went into effect, crypto trading volume in India dropped by 55%. Fintech companies and banks denied crypto transactions, leading to a further drop. There was a 70% to 90% drop in trading volume across the entire Indian crypto market by the end of April.

Indian crypto entrepreneurs and investors started looking elsewhere, and Dubai seemed like the perfect destination.

It's 30% tax and 1% TDS in India. Apart from the general 5% VAT in Dubai, there's no income tax on virtual assets. As income isn't taxed in Dubai, any gains you make from selling virtual assets like crypto or NFTs are yours. Thanks to the Dubai Virtual Asset Regulation Law, there's a clear set of laws regarding Crypto buying and selling.

Now this brain drain could have an adverse effect on India's growth and development in the crypto space and would result in a lot of VC money going to these countries too. As most of these companies have moved their offices out of India, India still has time.

Crypto builders and investors are also waiting for India's Crypto Bill and if the government listens to them and writes laws accordingly, most of these entrepreneurs would love to come back to India.

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