Hawala goes digital: Illegal OTC crypto trading flourishes in India

For one crypto trader in Gujarat, business has never been better. Having experienced the highs of the crypto boom in 2021, he watched dispassionately as crypto—both globally and especially in India—has floundered ever since. 

While this came in the form of cryptocurrencies like Luna and crypto exchanges such as FTX imploding in the West, India’s crypto struggles truly began when the government imposed a 30% tax on all crypto income, starting in April 2022. This, coupled with a 1% tax deducted at source on all crypto transactions saw investors flee the space. Between January-May 2023, funding for India’s Web3 startups dropped by 97% compared to the same period a year prior, Moneycontrol reported.

There was a mass exodus of Indian crypto traders as well, most of whom parked their assets overseas to avoid the prying eyes of the Indian government. Between January 2022 and October 2022, Indian crypto exchanges saw monthly transaction volumes drop over 97%—from over $4,376.7 million to $137.6 million, according to a report by tech policy think tank ESYA.