The Indian crypto market is going from strength to strength with rising valuations, influx of new investors and the emergence of startups going beyond the typical crypto exchange model. Eyeing a piece of the Indian crypto market, global exchanges are looking to set up shop, either through independent operations or through acquisitions.
Despite no clarity on regulations and the speculated ban on cryptos, the likes of US-based Kraken, Hong Kong-headquartered Bitfinex, and KuCoin are reportedly close to entering the Indian market.
According to a Reuters report, Kraken, Bitfinex, and KuCoin are actively scouting the Indian market, with some even close to acquiring Indian startups to begin operations in India. That’s the route that Binance took in November 2019, when it acquired WazirX.
But these companies would have to be wary of Indian regulations changing and impacting the crypto industry. So far, crypto startups have had to contend with banks arbitrarily halting transactions on their platform, despite a Supreme Court order in March 2020 allowing the use of bank accounts and cards for crypto transactions. While these banks have now re-allowed transactions for crypto investments, the future is murky.
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The entry of Bitfinex, Kraken and KuCoin will catalyse the Indian market, but also lead to more intense competition for the Indian startups, amid the boom.
In the past few months, WazirX has seen exponential growth, just as other exchanges including CoinSwitch Kuber, Zebpay, CoinDCX among others. CoinSwitch Kuber raised $25 Mn at a $500 Mn valuation in April 2021, which kicked off a major boom for the Indian crypto industry.
In April, WazirX claimed it hit $5.4 Bn in transaction volumes, which is tenfold rise from $500 Mn in December 2020. Its user base shot up by 50% to 3 Mn in April, and in May, it saw crypto trades worth over $380 Mn on its platform on a single day.
The uncertainty has not stopped new investments into the crypto market from venture capital investors in the US and other countries. US VC Tim Draper was the first American investor to bet on a Indian crypto startup, after his firm led a $5 Mn round in Unocoin in October 2020. CoinSwitch Kuber raised $40 Mn in two funding rounds from Ribbit Capital and Tiger Global in January and April.
Beyond exchanges, investors are now looking for innovative blockchain and crypto projects. Last week, tech billionaire Mark Cuban invested an undisclosed amount in Polygon, a Mumbai-based cryptocurrency platform that aims to provide faster and cheaper transactions on the Ethereum blockchain. Polygon’s native token Matic has crossed a market cap of over $10 Bn and is among the top 20 crypto coins globally.
Many tech ecosystem stakeholders have called for the government to regulate cryptos as an investment asset, rather than a currency. Earlier this week, Infosys cofounder and the architect of India’s Aadhaar programme Nandan Nikelani backed the use of crypto as an investment asset class, to be bought and sold like a commodity or shares, amid confusion about the regulatory stance on crypto in India.
Nilekani claimed allowing individuals and businesses to tap the $1.5 Tn market would allow the crypto industry to generate wealth and add value to India’s economy. “Just like you have some of your assets in gold or real estate, you can have some of your assets in crypto…I think there’s a role for crypto as a stored value but certainly not in a transactional sense,” Nilekani said.