• Tuesday, March 05, 2024


Why crypto firms from India are queuing up for Dubai address

While India has introduced cess on profits derived from crypto trading, the UAE has taken proactive measures to establish a regulatory framework that is robust and adaptable.

Cryptocurrencies: iStock image

By: Shubham Ghosh

A GROWING cohort of Indian crypto films is migrating to Dubai to escape the high tax environment in their native land, thanks to its fabourable regulatory conditions.

Crypto experts interpret this migration as a response to the stringent tax regulations and unclear legal framework surrounding digital currencies in India. In June 2022, the Indian government implemented a 30 per cent tax on profits from cryptocurrency trading and imposed one per cent tax on transactions surpassing Rs 10,000 (£96).

As against a challenging crypto landscape elsewhere, the UAE stands out with its low taxes, streamlined business setup processes, and a specialized regulatory framework tailored for digital assets.

Read: Talks on over global framework for crypto rules, says G20 chair India

Positioned as the premier financial hub in the Middle East, the country offers an enticing destination for crypto enterprises. In particular, Dubai has emerged as a beacon of crypto innovation, propelled by strategic policies and a regulatory environment that fosters growth, according to crypto strategists, Khaleej Times reported.

“A lot of Web3 founders prefer Dubai or Singapore as their hub because they have clarity and certainty around regulations and greater community support. When you’re setting up a business, investors are more comfortable investing in a jurisdiction where there are no last minute surprises. I am starting to see this trend on the ground and it must be reversed,” Sumit Gupta, CEO of Bengaluru-based CoinDCX, was quoted as saying by the media.

Read: India urges IMF, FSB to prepare technical paper on regulating crypto

He added that a staggering decline of over 90 per cent in volumes has been witnessed. Gupta also said that despite India maintaining its position as the leader in grassroots crypto adoption, much of the activity has shifted to alternative channels due to the burden of high tax rates.

In addition to the existing 30 per cent tax and applicable surcharge, India has introduced a four per cent cess on profits derived from crypto trading. Last year, Indian crypto traders also encountered a new challenge with the imposition of a one per cent tax deducted at source (TDS) on crypto transactions exceeding Rs 10,000.

As per an amendment to India’s Income Tax Act, failure to comply with TDS regulations may lead to penalties equivalent to the unpaid amount, a 15 per cent interest on overdue payments, and in certain circumstances, even imprisonment.

The UAE, on the other hand, has taken proactive measures to establish a regulatory framework that is both robust and adaptable. Over the past three years, Dubai and Abu Dhabi have spearheaded regulatory initiatives aimed at attracting a diverse array of businesses specializing in digital assets.

These efforts have drawn considerable talent, investment, and positive attention to the region, according to experts in the crypto market, the Khaleej Times report added.

Dubai has actively pursued top talent in the crypto industry, going as far as establishing the Dubai World Trade Centre as a designated free zone specifically for regulated virtual asset businesses. This specialised zone offers numerous advantages, including foreign ownership, zero corporate tax, business start-up packages, access to co-working and office spaces, and integration into a community of over 1,400 companies.

According to New York-based Chainalysis, the Middle East and Africa region has emerged as the sixth-largest crypto economy, with an estimated $400 billion (£319 billion) or 7.2 percent of the global transaction volume recorded between July 2022 and June 2023.

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