Will desi crypto exchanges sink or swim?

CHENNAI: POST Biparjoy that wreaked havoc in Gujarat, a similar cyclone seems to be hovering over the Indian crypto exchanges! Will the Government effectuate a plan akin to the evacuation and disaster relief measures to rescue the battered exchanges (post the 30% taxation era)?

Within weeks, a clear indication of a crypto “brain drain” emerged as crypto trading volumes plummeted over 70% and the Indian government imposed a “shadow ban,” prompting local payment processors to shut off crypto exchanges’ banking access. Soon, the world took notice, and global industry players such as Changpeng ‘CZ’ Zhao, CEO of Binance, stated that India’s taxes would likely “kill the industry” in the country. And sure enough, 2023, data showed crypto traffic in the country continued to plummet and Indians have transferred over $3.8 billion in trading volume from domestic to international crypto exchanges.

Sink or survive is the new mantra for exchanges across the nation as all have gone into the survival mode shell. Will innovation help them float or the lack of it will sink them for good?

Innovation in any space is good. It moves us out of our comfort zones and exchanges too are reinventing their business models. The focus that was on customer acquisition a year back has given way to cutting costs renegotiating partner contracts, suspending employee pay-hikes, conducting layoffs, and most important exploring new revenue models, and re-branding themselves in order to extend their financial runways if they run out of money.

So, how does an exchange survive such an onslaught? Let’s quickly see how the innovation evolution is emerging by these exchanges

CoinSwitch dropped “Kuber” from its former name, and transitioned from a cryptocurrency exchange to an investment platform. The raids any Indian enforcement agencies probably prompted this as well.

CoinDCX has placed its bets on their Okto Wallet - a free universal, open-loop mobile payment app that aims to reduce payment friction, enhance payment experience, allowing real-time e-money funds transfers in a cashless, secure and fast way

Until recently India’s largest exchange by trading volume, has survived a turbulent year. Founder, Nischal Shetty relocated from India to Dubai to concentrate on a new project late last year even as the future of the exchange appeared uncertain. They have renegotiated contracts with partners, laid off employees but maintained that will not diversify. It will maintain its cryptocentricity. It plans to leverage its 15 million registered users to lucrative partnerships, such as its recent alliance with tax software provider TaxNodes.

ZebPay’s internal revenue strategy is focused on increasing the lending value of their customers and concentrate on user growth while also attempting to generate institutional investment interest. On the other hand, Giottus, a lesser-known Indian exchange known for its staking service and multilingual options in the country is working towards achieving operational excellence, constructing their products correctly, drastically reducing marketing and acquisition costs, and minimising the perceived risks associated with exchanges.

We hope that the innovation does not get mired in a vision conundrum and that the innovation process becomes an ongoing process, rather than a knee jerk reaction to present market dynamics. For as Steve Jobs said; innovation is the ability to see change as an opportunity - not a threat! Innovation, my friends, is when we shall imagine the future, and fill those gaps!

—​(The writer is founder, India Blockchain Alliance)