The survey, encompassing 1,342 highly educated respondents from five major urban centers—Ahmedabad, Bengaluru, Delhi, Jaipur, and Lucknow—was carried out between March and April. The results indicate a profound awareness among Indian investors regarding the existing crypto tax and AML regulations, with 58% and 52% cognizance levels, respectively.

A remarkable 93% of investors showed a preference for collateralized stablecoins over their algorithmic counterparts. This preference underscores a cautious approach towards investment stability amid regulatory uncertainties.

Impact of AML Laws

The study highlighted a noticeable shift in investment patterns due to AML laws. The enforcement of India’s anti-money laundering law has catalyzed an 8% shift from crypto investments towards equity investments. This trend is attributed to the mandatory registration of crypto businesses with the Financial Intelligence Unit (FIU) under the Prevention of Money Laundering Act (PMLA) since the previous year.

Crypto Taxation Challenges

Despite mounting evidence and advocacy from entities like Esya, India’s crypto tax regime remains unaltered since its inception in 2022. The survey’s findings reveal that awareness of tax regulations has paradoxically increased investment in crypto assets by 10% and spurred a 15% rise in investments through foreign crypto platforms.

Read more: India Upholds Controversial Crypto Tax Regulations in 2024 Budget

However, the Indian government’s crackdown on offshore exchanges, blocking as many as nine platforms, has partly reversed this trend. Nonetheless, some investors continue to circumvent these blocks, suggesting that AML regulations alone are insufficient to neutralize the impact of high crypto taxes.

Recommendations for Policy Revision

In light of these findings, the Esya Centre reiterates its recommendation for the government to reconsider its tax policies on crypto assets. The think tank advocates for a revision of tax rules to prevent the offshoring of investments and recommends that future regulatory measures be developed in consultation with crypto exchanges to ensure a balanced and effective framework.

Investor Sentiment

All respondents expressed a strong attraction to crypto assets as a promising investment avenue and for facilitating cross-border transactions. However, non-fungible tokens (NFTs) and stablecoins did not share the same level of perceived profitability.