India’s crypto talent has been swarming out of the country for years owing to regulatory uncertainty, and the government’s recent decision to tax crypto income hasn’t slowed the nation’s blockchain brain drain.
According to the Economic Times, 30 to 50 Indian crypto and blockchain entrepreneurs run their businesses out of Dubai and Singapore. The flight of talent can be traced back to 2018, when the Reserve Bank of India (RBI) imposed a de facto ban on crypto. Zebpay, one of the largest Indian exchanges at the time, shuttered operations and moved to Singapore. However, it has resumed services for Indians since the RBI’s banking ban on crypto was reversed by the Supreme Court in 2020.
New tax rules and the return of the RBI’s push for a ban contribute to extending the brain drain, local industry stakeholders told Forkast. This time, the added burden of a steep 30% crypto tax may not just drain professional talent, but some investors are also considering relocating to crypto-friendly jurisdictions.
“The country is probably suffering more because of the uncertain stance than anything else,” Akshay Aggarwal, co-founder of crypto community Blockchained India, told Forkast in an email. “The builders are moving out to register headquarters and pay taxes in foreign jurisdictions.”
With a large base of potential customers in the world’s second-most populous country, Aggarwal added that India would remain attractive as a market for crypto businesses. But even if companies continue to provide services in the country, they may choose to set up elsewhere because of the regulatory chaos.
For instance, 5ire, a blockchain network founded by Indian entrepreneurs in August, is headquartered in London. “Although we are incorporated elsewhere, the majority of our talent and operations are India-based,” Pratik Gauri, founder and CEO of 5ire, told Forkast in an email.
Indian crypto exchange Vauld was set up in Singapore in 2018 to hedge against regulatory uncertainty and did not serve its native market until the RBI’s crypto ban was reversed.
“Unless there is a major positive stance ahead, I see more and more founders from India would resort to formulating companies in more favorable regulatory environments like the British Virgin Islands or Dubai that have a strong one-directional vision to support innovation. The wait-and-watch approach is only hampering India’s prospects,” Aggarwal added.
The British Virgin Islands and Dubai are at the top of the wish list for relocation hopefuls charmed by the foreign regions’ taxless approach towards crypto. Indian investors say the local tax is too high for private investors while harming those receiving crypto wages.
Kaparthi Jonnalagadda, a crypto investor and entrepreneur who used to pay his employees in crypto, is considering relocating abroad. However, he believes that the government will revise the tax percentage in the long term.
“Till now, the government has received nothing [in taxes],” Jonnalagadda said. “I believe once the government gets what it needs, there’ll be a change in [tax].”
The government is currently is considering a return to regular air travel from March 15, just weeks before April’s crypto tax kicks in. Meanwhile, local industry players continue shopping for new homes.
“It’s time that the government realizes that it’s competing with other governments in terms of innovation-friendly policies, and the only way to realize the US$5 trillion GDP goal is to outperform at innovations like that of cryptocurrencies,” Aggarwal said.
