India continues to establish itself as a hotbed for the crypto industry… both positively and negatively.
From 2020-2021, India’s crypto market grew 641% according to Chainalysis. Today, there are an estimated 15 million crypto users in the country, but with a population of more than 1.4 billion people that skew young and well-educated, it’s obvious that the country could be a major player in the future of crypto.
All Eyes On India:
Due to this potential, it’s no wonder that Coinbase is pushing into the country, announcing they would hire over 1,000 people in their India hub this year alone.
But it doesn’t stop with companies hiring. Large crypto players are also making more direct moves into the country.
This week, Indian crypto exchange CoinDCX announced the raise of $135 million at a $2 billion valuation. What makes the round interesting is not the traditional VC firms backing the company, but the fact that Coinbase Ventures was a major investor in the round. That’s because Coinbase was also a major investor in CoinDCX’s direct competitor, CoinSwitch Kuber, which raised $260 million at a $1.9 billion valuation late last year. All in, Coinbase has announced they have invested more than $150 million into the country with more to come.
Coinbase isn’t the only exchange looking to break into India. In 2019, Binance acquired the Indian-based exchange, WazirX, with the two companies then setting up a $50 million fund to invest in the Indian crypto ecosystem.
Reports also state that FTX is in talks to invest in the Indian gaming startup MPL, which recently raised money at a $2.5 billion valuation.
The Government Punches Back:
Even though the population is beginning to embrace crypto and the government states that it sees its potential for tax revenue, the industry still faces determent from the central bank.
While India’s central bank wouldn’t be the first to criticize crypto, the Reserve Bank of India has been particularly cumbersome, comparing the asset class to the Dutch tulip bubble and ponzi schemes, as well as stating that it should be banned as it threatens financial stability.
Going further, on April 7th, Coinbase debuted crypto trading for India by supporting the UPI, a payments infrastructure developed by a coalition of Indian retail banks. Only three days later, the company suspended operations after the National Payments Corporation of India made a strange announcement.
This all comes at a time when India has proposed a new taxation law that doesn’t allow people to offset loss on one asset against profit from another and will tax income from the transfer of any virtual assets at 30%.
Although some were happy as the new law would help legitimize crypto in India, others… not so much.
Sandeep Nailwal, the founder of Polygon, the largest Layer 2 protocol for Ethereum, said that the new rules are causing a brain drain in India and that “the way the regulatory uncertainty is… it doesn’t make sense for us or for any team to expose their protocols to local risks.”
This uncertainty has caused companies like Polygon and WazirX to move operations to Dubai. So, the future remains unclear for India’s crypto ecosystem. Regardless, we expect to see a lot more positive and negative announcements alike emerging from the country.