According to a research study by the New Delhi-based technology policy think tank Esya Centre, a significant amount of trading volume, totaling $3.8 billion, has been moved from local to international cryptocurrency exchanges in India following the implementation of stringent crypto tax rules in the country.

The report provides the first monetary estimate of the impact of India's controversial crypto tax policy on domestic exchanges. Prime Minister Narendra Modi’s government announced a 30% tax on crypto profits and a 1% tax deducted at source (TDS) on all transactions on Feb. 1, 2022.

The study found that domestic exchanges lost 81% of their trading volumes in the four months following the implementation of the 1% tax deducted at source rule, and predicted that centralized exchange businesses in India may become unviable if the current trend continues.

The researchers recommended altering the tax deducted at source from 1% per transaction to 0.1%, allowing losses to offset gains, and implementing progressive taxes on gains rather than a flat 30% tax. These findings may increase pressure on authorities to address outflows through cryptocurrency that contribute to India's current account deficit.