Crypto exchanges diversifying, is this the end of the shining crypto story in India? 

The top three crypto exchanges by trading volumes in India, CoinDCX, CoinSwitch Kuber, and WazirX are diversifying their operations. CoinSwitch Kuber is entering into equities and mutual funds; CoinDCX has ramped up its investment arm, CoinDCX Ventures, and WazirX founders have shifted their base to Dubai and focussing on new projects. But what is pushing these top Indian crypto companies to greener pastures? Business Today finds out. 

New Taxation
The recent Union Budget introduced a new 30 per cent tax on all crypto gains along with a 1 per cent TDS. Moreover, the new tax laws also introduced provisions of no set-offs and carryforwards of crypto losses. 

And the impact of these laws was visible within days of its imposition. Trade volumes dropped drastically across all exchanges. As per data from CREBACO, a crypto research firm, WazirX witnessed a 72.31 per cent drop in trading volumes from April 1 to April 10. CoinDCX trading volumes fell 52.58 per cent in the same time period. 

Sidharth Sogani, founder and CEO of CREBACO Global, told Business Today "The overall enthusiasm and momentum of the crypto market in India has nearly died. The volumes are a clear indication of the sentiment” 

Mobikwik debacle
The fintech major Mobikwik suspended its services across all cryptocurrency exchanges from April 1, as previously reported by Business Today. Business Today also reported that Mobikwik’s application to operate Zaakpay as a payment aggregator has been rejected by the Reserve Bank of India because of its close ties with cryptocurrency exchanges. 

UPI suspension 

After cryptocurrency exchange Coinbase launched operations in India promising customers the option to buy crypto via UPI the National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems, came out with an official statement stating that the organisation was "not aware of any crypto exchange using UPI”.  

Interestingly, several Indian crypto exchanges offered their customers the option to buy cryptocurrencies via UPI. Days after NPCI's clarification, UPI services were disabled across various Indian crypto exchanges and the payment system was under regulatory scrutiny. 

Banks staying clear of crypto exchanges 

Recently, Kotak Mahindra Bank withdrew its services from the crypto exchange CoinSwitch Kuber. Moreover, major banks have started withdrawing their services from cryptocurrency exchanges. Nischal Shetty, co-founder and CEO of WazirX told Business Today, “Currently, there has been reluctance from the banking industry to provide crypto exchanges with channels to deposit funds. The challenges that crypto investors are facing today can lead to an array of disadvantages for the entire system. It can also lead to traders transacting on P2P exchanges instead of the Indian exchanges that are KYC compliant.” 

New KYC related compliances 

The Ministry of Electronics and Information Technology released a circular last month making it compulsory for virtual assets service providers, including all crypto exchanges, to store KYC details and transaction records of their users for a period of five years. This regulatory requirement will bump up compliance costs for virtual assets providers. Anshul Dhir COO of EasyFi Network, a Web3 platform, told Business Today, “I think this request from the government of India is extraordinary when it comes to the preservation of data for long, five years. So, I believe they have to completely change their business models if they want to comply with the new rules.”  

Is this the end of India’s shining crypto story? 

Kashif Raza, crypto expert and founder of Bitninning breaks down why crypto exchanges are looking toward greener pastures. He told Business Today, “The incentive to enter into the crypto industry has gone down both on the institutional and retail front. The cost of compliance has gone up due to the recent regulatory requirement which has made the crypto industry less attractive.” 

“Investors are less interested in cryptocurrencies because of the newly introduced taxation.”  

Talking about exchanges diversifying their operations, Raza said,”CoinSwitch is exploring equities, CoinDCX is exploring investing in Web3 startups, some exchanges are entering new markets, etc because now exchanges need to focus on additional sources of revenue because running a crypto exchange is not as lucrative as before because of the increase in the compliance costs.” 

But Raza is still hopeful about India’s crypto story.  He said, “The speed of India’s crypto train might have been reduced, but there is still hope for innovation and growth in the future.” 

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