Indian crypto exchanges are facing a challenging time, as they try to survive amidst stiff taxes, a brain drain and a shadow ban. In an effort to extend their financial runways, they have been cutting costs, re-negotiating partner contracts, suspending employee pay-hikes, conducting lay-offs, exploring new revenue models and rebranding themselves. CoinDesk spoke to employees and senior executives at six prominent Indian crypto platforms – CoinDCX, CoinSwitch, WazirX, BuyUCoin, ZebPay and Giottus. Several of these exchanges said their runways range from 21 months to four years, which can, if true, likely take them into the next bull market. CoinSwitch and ZebPay did not share their financial runway timelines.
The survival of India’s crypto exchanges has been a concern since Feb. 1, 2022, when the nation announced stiff taxes – a 30% tax on crypto profits and the more controversial 1% tax deducted at source (TDS) on all transactions. At the time, local industry leaders said they had entered a “period of pain” but that “ultimately, technology always emerges, it always wins.” Signs of a crypto “brain drain” emerged within weeks. Ten days after the taxes were implemented, crypto trading volumes plummeted, in some cases more than 70%. India’s government then imposed a “shadow ban,” which saw local payment processors cut off banking access to crypto exchanges. Four months into the imposition of the 30% tax, the industry’s advocacy body was disbanded and enforcement agencies were investigating at least 10 crypto exchanges for allegedly assisting foreign firms launder money via crypto. Soon, the world took note and global industry leaders such as Binance CEO Changpeng ‘CZ’ Zhao claimed India’s taxes would probably “kill the industry” in the country. By 2023, data revealed crypto traffic in the nation continued its nosedive and that Indians had moved more than $3.8 billion in trading volume from local to international crypto exchanges.
India, as president of the Group of 20 (G-20) in 2023, has prioritized framing globally coordinated rules for the crypto sector. As a result, experts say, it needed to align with the guidelines of the global standard setter, the Financial Action Task Force (FATF) on virtual assets by including Indian crypto business under anti-money laundering rules. This move, which adds some legitimacy to the sector by way of setting up regulatory oversight, has fueled a little optimism among Indian exchanges on the local industry’s longevity, even if the nation doesn’t change its tax regime, according to several industry officials. But they don’t have an answer to what happens if the tax regime stays the same – and are taking various steps to guard against such a scenario.
Indian crypto exchange CoinDCX is weathering the storm by diversifying and banking on its recent series D funding of $135 million. “We have a runway of four years,” under present conditions, said Neeraj Khandelwal, co-founder of CoinDCX and Okto. “Our biggest bet is on our Okto Wallet. We believe DeFi [decentralized finance] will offer 10X value eventually as only 6.5 million DeFi customers exist, while there are 400 million crypto investors.” CoinDCX has been leading engagement with lawmakers through the industry’s policy advocacy body, Khandelwal said, exemplified by a recent event, and has emerged as a major player in the Indian crypto industry after recent setbacks faced by WazirX, who ostensibly led the industry in policy engagement before CoinDCX. Its strategy, Khandelwal says, is “investing heavily in innovation and technology,” including hiring in the space “even now” as we “never overhired.”
WazirX, India’s biggest exchange by trading volume until recently, continues to survive despite a tumultuous year. The exchange’s future seemed uncertain when its founder Nischal Shetty moved from India to Dubai to focus on a new project late last year. Later, Indian agencies that were investigating local crypto exchanges raided properties tied to a director of WazirX. Shortly after, Binance CEO Zhao and Shetty were involved in a public spat over who truly controls the exchange – a quarrel that continues to this day. The events have seen the exchange lay off 40% of its staff. Yet, the exchange has a 21-month runway, said an employee who was not authorized to speak publicly about the company. “But employees who deserve pay hikes won’t be getting them,” he said. WazirX’s survival strategy is to renegotiate contracts with partners including software vendors, the person said. Unlike some other exchanges, WazirX will not be diversifying. It will stay focused on crypto. “That’s what the founders enshrined into us,” the person said. “The idea is to survive because [the] Bitcoin halving is going to happen in May 2024 when, we hope, a bull run will come. By then, if things don’t break, we should be around to see it.”
CoinSwitch shed “Kuber” from its previous name, CoinSwitch Kuber, and pivoted from being a crypto exchange to a crypto investment platform. This occurred as India’s taxes, the crypto winter and the ire of Indian agencies all hit the platform hard. CoinSwitch properties were raided by Indian agencies in August 2022. “CoinSwitch has always been conscious of its expenses,” said Ashish Singhal, the company’s co-founder and CEO. “Today, we are proudly serving more than 19 million registered users, and are excited to grow and evolve with them by providing them with a diverse range of investment options, including fixed deposits (FD), mutual funds, Indian stocks, and more.” Without giving a timeline on its runway, Singhal said “our healthy runway gives us enough ammunition to invest in our long-term vision – to be a one-stop wealth-tech destination for Indians.” Singhal also said his company has “strengthened its leadership team by hiring industry experts,” presumably to navigate the choppy waters of the Indian crypto industry.
In conclusion, Indian crypto exchanges have been facing a challenging time, with stiff taxes, a brain drain and a shadow ban all contributing to a difficult operating environment. However, some exchanges are taking steps to extend their financial runways, such as by cutting costs, re-negotiating partner contracts, suspending employee pay-hikes, conducting lay-offs, exploring new revenue models and rebranding themselves. While the situation remains uncertain, the fact that India is prioritizing framing globally coordinated rules for the crypto sector has fueled a little optimism among Indian exchanges on the local industry’s longevity. Only time will tell how this will all play out, but for now, Indian crypto exchanges are doing their best to survive.
