The Crypto Times said tax rules have pushed traders away from spot markets into largely unregulated crypto derivatives, even as 70%-80% of participants in the segment are reported to be losing money.
More than 80% of India’s crypto trading volume is now concentrated in futures and other derivatives on domestic exchanges, according to reports that linked the shift to India’s tax treatment of Virtual Digital Assets. India taxes spot crypto trades at 30% and imposes a 1% withholding tax, while futures are excluded because no actual VDA transfer occurs, making active spot trading more capital-intensive and pushing traders toward derivatives. Many tax professionals classify futures profits as speculative business income taxed at slab rates, with loss set-offs allowed, unlike the VDA regime, which bars offsetting losses even between two cryptocurrencies. The shift has created what earlier reporting described as a structural arbitrage, with traders pursuing similar market exposure through products that receive very different tax treatment. Yet internal platform data cited in prior coverage indicates about 70% to 80% of crypto derivatives participants are in losses, while individual investors account for roughly 70% of futures activity and bear most of the damage. Some exchanges reportedly offer leverage of up to 100x, adding to concerns in a market that still lacks a dedicated regulatory framework. The tax gap has also pushed trading offshore. Around three-fourths of Indian crypto activity now flows through foreign platforms such as Binance and Bybit, earlier reporting said, while policymakers continue to weigh how the sector should be overseen. Calls for clearer regulation have grown as derivatives take a bigger share of trading and losses mount among retail participants.