India’s crypto market will change more because of tax rules than new regulations over the next year, according to Rajagopal Menon, Vice President of WazirX.
Menon told Coin Edition that India’s 30% tax on crypto gains and 1% tax deducted at source (TDS) have already changed how Indians trade crypto. Many users have moved their trading to offshore platforms.
Indian authorities are also increasing their oversight of crypto companies. On September 9, the Financial Intelligence Unit-India (FIU-IND) issued notices to 15 crypto service providers over alleged failures to follow anti-money laundering rules. It also ordered steps to remove their apps and websites from public access.
Despite these restrictions, India remains one of the world’s biggest crypto markets. Chainalysis ranked India first in its 2025 Global Crypto Adoption Index.
Bitcoin Will Fall After Higher-Than-Expected US Inflation
Menon said Indian crypto investors will react cautiously if US inflation comes in higher than expected and causes global markets to fall. He pointed to September 13, 2022, when Bitcoin fell about 10% after US inflation was higher than expected.
Indian investors are affected by the same global Bitcoin price movements as investors in other countries. A sharp reaction to US inflation data will therefore affect spot and futures trading in India.
However, Menon said investors should pay attention to what happens after the initial fall. If new buyers enter the market, the recovery will be stronger. If the price rises only because traders are closing short positions, the recovery will be less meaningful.
How Derivatives Help Reduce Risk
Menon said Bitcoin can be part of a diversified portfolio for investors who believe in the long-term growth of digital assets. Futures and other derivatives also help investors manage short-term risk.
For example, an investor holding ₹1 lakh worth of Bitcoin could short Bitcoin futures worth ₹50,000.
If Bitcoin falls 10%, the ₹1 lakh Bitcoin holding would lose about ₹10,000. At the same time, the ₹50,000 futures position would gain about ₹5,000, before fees, funding costs and other expenses.
The hedge reduces some losses, but it also reduces some profits if Bitcoin rises. Menon said investors using futures must understand margin requirements, fees, funding costs and liquidation risks.
Open Interest and Funding Rates Show Market Risk
Before major economic events, such as US inflation reports or Federal Reserve decisions, Menon said traders should watch open interest and spot trading activity.
If open interest rises much faster than spot activity, it indicates that traders are using more leverage without a similar increase in actual buying and selling of Bitcoin.
Funding rates also show whether traders are heavily positioned in one direction. High leverage, thin order books, and sudden market moves cause large price swings. Traders can lose money despite correctly predicting the overall direction if their positions are liquidated during a sudden move.
Menon said traders should know their liquidation levels and keep enough margin to handle sudden volatility.
Bitcoin and Stocks Have Different Investment Characteristics
India has a large retail stock market, which makes it natural to compare stocks with Bitcoin. Menon said stocks represent ownership in companies, whose earnings and cash flows can be studied.
Bitcoin is different. Its investment case is based mainly on its limited supply and expectations of wider adoption. Unlike a company, Bitcoin does not produce earnings or cash flow. Investors can hold both, Menon said, but the amount they put into each should depend on their risk tolerance, investment timeframe and goals.
WazirX Wants the Same Rules for Offshore Exchanges
Menon said Indian crypto exchanges are at a disadvantage when offshore platforms serving Indian customers do not face the same tax and reporting requirements.
Indian exchanges deduct TDS on applicable transactions, while some offshore platforms do not do so in practice. Indian users remain responsible for following India’s tax rules regardless of where they trade.
Menon said all platforms serving Indian users should have the same tax and reporting obligations.
He said this would let Indian exchanges compete on their products and services instead of being disadvantaged by extra regulatory costs.
Crypto Taxes Have Pushed Some Trading Offshore
Menon said India’s crypto tax rules have already affected where Indians trade. In a submission to India’s Parliamentary Standing Committee on Finance, WazirX cited an ESYA estimate that 30 lakh to 50 lakh Indian users moved to offshore platforms after the 1% TDS was introduced.
Another report by Tax Information Online and the Taxpayers’ Foundation estimated that offshore platforms handled about 91.5% of Indian crypto trading volume between October 2024 and October 2025.
The report estimated offshore trading at ₹4.88 lakh crore, compared with about ₹45,000 crore on domestic exchanges. These numbers are estimates, not official government figures. However, Menon said they show how taxes affect traders’ behavior.
For active traders, repeated TDS deductions reduce the amount of money available for future trades.
WazirX has recommended reducing TDS while requiring offshore platforms to report transactions and follow similar rules. The goal is to encourage more trading in India while giving authorities better visibility into crypto activity.
Indians Still Have Strong Demand for Crypto
Despite India’s crypto tax rules and warnings from the Reserve Bank of India, demand for digital assets remains strong.
Chainalysis ranked India first in its 2025 crypto adoption index. Menon said the main change has been where Indians trade, rather than whether they still want to trade crypto.
A drop in trading activity on Indian exchanges therefore does not necessarily mean that Indian interest in crypto has fallen.
Menon believes lower TDS and clearer rules for handling losses will encourage more users to return to Indian exchanges. He expects taxation to be one of the biggest factors affecting India’s crypto market over the next year.
WazirX Is Trying to Win Back Users
The comments come as WazirX works to rebuild its business after relaunching. According to WazirX’s H1 2026 report, about 95% of trading activity after the restart came from returning users. Around one in seven returning traders added new money to their accounts.
Menon said WazirX is watching returning users, new deposits, repeat trading and customer support to measure whether customer trust is returning.
The exchange has also expanded its products. Its H1 report said futures trading increased 300% between March and June. More than 93% of futures users also continued trading spot crypto.
WazirX Zero is designed to make spot trading costs easier to understand, while futures allow users to hedge or take positions based on whether they expect prices to rise or fall.
WazirX AI is intended to make market information easier to understand. Menon also said customer support is important for rebuilding trust. He said users should receive quick answers and regular updates when problems take longer to solve.
Crypto Traders Face Similar Risks to Stock Traders
Menon said crypto traders face some of the same psychological risks as stock and derivatives traders. Winning trades can make traders overconfident, while losses can encourage them to take bigger positions to try to recover their money.
Leverage makes both gains and losses larger.
Crypto also trades 24 hours a day, which encourages impulsive decisions. Menon said traders should understand margin requirements and set position limits.
However, he cautioned against automatically applying research from India’s stock market to crypto because there is not enough comparable data. He said crypto exchanges should study their own users and use the results to improve education and safety features.
FIU Action Highlights the Importance of Compliance
The latest action by FIU-IND shows how important compliance has become for crypto platforms operating in India.
The government said it was targeting the 15 platforms for alleged violations of the Prevention of Money Laundering Act. The platforms included Weex, Blofin, Bitunix, DigiFinex, Toobit, XT.com, WOO X and Pionex.
Menon said compliance rules are important for protecting users and preventing crypto platforms from being used for illegal money transfers. He pointed to measures such as KYC, anti-money laundering checks, geotagging and liveness verification.
Menon believes the same rules should apply to all platforms serving Indian customers, whether they are based in India or overseas.
The Main Point
India remains a major crypto market, but a large amount of trading activity appears to have moved offshore. Menon believes taxes are a major reason for this shift. He argues that lowering TDS, allowing better treatment of losses, and applying similar requirements to offshore platforms will encourage more trading to return to Indian exchanges.
At the same time, global Bitcoin prices will continue to affect Indian traders. Over the next year, Menon expects tax policy, more than broader regulation, to strongly influence where and how Indians trade crypto.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
