China has banned cryptocurrencies outright, and the West is looking to regulate them. India is taking a different approach: Tax them to death.

One of the world’s most spectacular crackdowns on cryptocurrencies has unfolded in the world’s second-most populous nation over the past several months. If other developing countries in Asia choose to take a similar approach, already suffering crypto investors could find themselves in for more pain in the months and years ahead.

Investment in India’s crypto sector surged after the Supreme Court quashed a ban on banks facilitating crypto trades in 2020. According to data shared by private-markets data provider Tracxn Technologies, India’s cryptocurrency industry has raised $24.2 billion in funding since the beginning of 2020.

But things have taken a turn for the worse this year. In July, India imposed a 1% tax on all digital-asset transfers above a certain size, deductible at the time of transaction. That tax is on top of a 30% rate on income from such assets promulgated in April.

Crypto trading volumes, which were already at depressed levels amid the continuing bear market, have since crashed. According to data shared by CoinDCX, India’s first cryptocurrency unicorn, trading volumes in the industry for the first 20 days of July stood at $500 million, a far cry from $5.6 billion in March. In addition, the government doesn’t permit trading losses on one cryptocurrency to offset gains on another for tax purposes—unlike with stocks and bonds.

India, with a partially convertible currency and some capital controls, is still figuring out how it wants to regulate cryptocurrencies over the longer run. Earlier this week, India’s Finance Minister Nirmala Sitharaman said the country seeks global consensus on how to regulate or ban such currencies, given their borderless nature.

Meanwhile, however, India seems to be taking a maximalist stance that goes further than regional peers. Indonesia, which is more welcoming of cryptocurrencies, has recently imposed a small value-added tax (VAT) on crypto asset transactions, and an income tax on capital gains from such investments at 0.1?ch. Singapore’s monetary authority has previously warned retail investors about the risks of trading in crypto assets, but also says it wants the city-state to be an “innovative and responsible digital asset hub."

Nonetheless, other emerging market regulators are also wary of crypto’s opacity, penchant for greasing capital outflows and attraction for retail investors—and are likely watching India’s moves closely. India’s tack has the advantage of raising some revenue for the government. And the 1% transaction tax, deducted immediately by exchanges themselves on behalf of the government, gives Delhi visibility into cryptocurrency capital flows.

CoinDCX co-founder Neeraj Khandelwal is hopeful that India won’t ban cryptocurrencies outright in the end. According to him, India wouldn’t want to be isolated on a global stage and would like to move in tandem with other countries.

Nonetheless India’s move to both tax crypto more and dilute some of its signature anonymity should be deeply worrying for the technology’s backers—particularly if other rapidly growing markets begin to believe it has the right idea.