Derivatives, Futures Trading a Tax Effective Solution to Drive Crypto Engagement in India: Pi42 Co-Founders

India’s crypto industry leaders have blamed the tax system for pushing investors out of the trading circle.

Written by Radhika Parashar, Edited by Siddharth Suvarna | Updated: 19 February 2024 12:55 IST

Derivatives, Futures Trading a Tax Effective Solution to Drive Crypto Engagement in India: Pi42 Co-Founders

Photo Credit: Unsplash/ Shubham Dhiman

India contributed 90.7 billion smart contracts in the global derivates market

Highlights

India’s tax policy on crypto have faced criticism from investors, stakeho
Futures and derivatives trading can help people dodge 1 percent TDS
These trading options let people hold assets till their predicted prices

Reeling under strict tax policies, India witnessed a rather stunted growth in the crypto sector. Industry leaders in India believe that futures trading in crypto can be a great solution to help potential investors still trade in crypto without having to worry about the tax load. Nischal Shetty and Avinash Shekhar – both veterans of the Indian Web3 arena, in conversation with Gadgets360, highlighted the issues with India's crypto tax regime and the need for crypto players to bring-in such services that could undeniably rise people's interest in these otherwise volatile crypto assets.

As per ZebPay's former CEO Shekhar and WazirX co-founder Shetty -- crypto derivatives have been a huge success, that have managed to grab a large chunk of crypto-driven trading volume. Citing this among many other reasons, Shetty and Shekhar justified the launch timing of their own futures exchange platform ‘Pi42' that was announced earlier this month.

“The crypto ecosystem has matured and wants more sophisticated tools for trading. In the backdrop, India's appetite for derivatives trading has also exponentially risen over the years,” Shetty said.

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Elaborating on his point, the former ZebPay CEO noted that India contributed 90.7 billion smart contracts in the global derivates market in 2023 in derivative trading. In this type of trading, an underlaying asset provides the value for the derivatives, letting traders guess the price movements of the underlaying assets and finally going for the trade.

In spot trading transactions, holders trade on the current prices of tokens and pay one percent TDS on each transaction, whereas in derivatives and futures trading, holders can keep the assets with them longer – waiting for the asset to reach the speculated price point. Doing this, helps the traders save up on the one percent TDS deduction that they face in spot trading.

“We are at the potential brink of a bull market. We feel it's important to create avenues for investors who want to participate in the crypto market in a tax efficient way. The idea for derivatives trading fits perfectly as this way, investors don't have to directly own crypto if they don't wish to but don't want to be left behind either. It's a great way to give them a glimpse into all the action happening in the crypto market,” WazirX's Shetty told Gadgets360.

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He noted that while the government mulls over reducing the one percent TDS for all crypto transactions to 0.01 percent – traders need to be engaged with day-to-day trading activities. Disclosing findings from his own experiences he states that working Young Indians are quite interested in staking, participating in airdrops, and referral programs alongside just traditional trading.

“Futures and derivatives are already a growing area of interest with lower spread and highly liquid markets. The modern-day investor is aware, well read and tech savvy. There are investors who know how to build a diversified portfolio to achieve financial security. The affinity towards virtual digital asses has grown owing to its decentralised ecosystem, and various use cases is what has sustained the interest of users,” Shekhar added.

Both the industry veterans are aiming to expand their Pi42 Futures trading exchange to other international locations now that it has debuted in India and capitalise on the demand of alternatives to traditional assets trading.

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Further reading: Cryptocurrency, India, nischal shetty, avinash shekhar, zebpay, wazirx

Radhika Parashar

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Radhika Parashar is a senior correspondent for Gadgets 360. She has been reporting on tech and telecom for the last three years now and will be focussing on writing about all things crypto. Besides this, she is a major sitcom nerd and often replies in Chandler Bing and Michael Scott references. For tips or queries you could reach out to her at RadhikaP@ndtv.com. More