India crypto exchanges plan long-term future

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India’s cryp­tocur­ren­cy exchanges are intro­duc­ing a series of what they call longer-term invest­ments to try and counter the plunge in cryp­to prices this year and a drop off in busi­ness as pun­ish­ing tax­es dri­ve day traders away.

The prod­ucts include stak­ing to earn inter­est on cryp­tocur­ren­cy deposits, and dol­lar-cost-aver­ag­ing func­tions to set aside funds to buy cryp­to on fixed dates, rather than try­ing to time the market.

Mum­bai-based exchange CoinD­CX, India’s first cryp­to uni­corn, last week intro­duced a mobile wal­let called Okto that gives access to an array of   decen­tral­ized finance (DeFi) apps.

“In India, the cur­rent con­di­tions favor long-term invest­ment prod­ucts as com­pared to spot or deriv­a­tives trad­ing,” said Aman­jot Mal­ho­tra, coun­try head (India) of Turkey-based cryp­tocur­ren­cy exchange Bitay. 

Bitay and oth­er exchanges oper­at­ing in India saw their busi­ness mod­els upend­ed when the gov­ern­ment slapped a flat 30% tax on all cryp­to income from April 1. This was fol­lowed by a 1% tax deduct­ed at source (TDS) on all cryp­to trans­ac­tions above 10,000 Indi­an rupees (US$126) from July 1.

The TDS has slashed so-called scalp trad­ing – buy­ing and sell­ing with­in sec­onds or min­utes to prof­it from small price move­ments – as pay­ing 1% on every trade erodes cap­i­tal, Mal­ho­tra told Forkast in an emailed response to questions. 

“On the oth­er hand, in long-term invest­ing, 1% TDS doesn’t mat­ter as the invest­ment fre­quen­cy is too low to affect the cap­i­tal inflow of the user.” 

Skep­ti­cal

Trad­ing vol­umes on India exchanges dropped as much as 70% after the 30% tax kicked in on April 1, accord­ing to a report by cryp­to researcher Crebaco. 

The tax­es and unfriend­ly reg­u­la­to­ry author­i­ties have prompt­ed some com­pa­nies to move out of India to Dubai and Sin­ga­pore, while oth­ers focus on new services.

Sub­hash Chan­dra Garg, India’s for­mer finance sec­re­tary and author of “The Ten Tril­lion Dream” on the country’s econ­o­my, is not sure the strat­e­gy to spin out new cryp­to prod­ucts will work. 

“These are all proxy prod­ucts” for a spec­u­la­tive asset, Garg told Forkast in an interview. 

Longer term invest­ment plans have been suc­cess­ful for stocks and oth­er finan­cial prod­ucts, but if the fun­da­men­tal instru­ment doesn’t inspire con­fi­dence then relat­ed prod­ucts are unlike­ly to change that, he said. 

That view isn’t stop­ping Indi­an exchanges from trying.

New ideas

CoinD­CX intro­duced a yield-earn­ing prod­uct in May that allows users to earn inter­est on cryp­tocur­ren­cy deposits. As many as 13% of the exchange’s active users have invest­ed in the prod­uct so far, said Minal Thukral, exec­u­tive vice pres­i­dent of growth and strat­e­gy at CoinDCX.

The com­pa­ny plans to intro­duce yield-farm­ing in DeFi around stak­ing, and decen­tral­ized lend­ing and bor­row­ing to give users more options across assets, Thukral told Forkast. 

CoinD­CX has about 2.5 mil­lion active users, with a total of 15 mil­lion reg­is­tered across its web and oth­er plat­forms, Thukral said, adding that the exchange has seen some decline in trad­ing. He did not give specifics. 

Indi­an cryp­to exchange Coin­Switch is tak­ing prod­uct plans beyond cryp­tocur­ren­cies and aims to intro­duce its first non-cryp­to prod­uct soon, said Ashish Sing­hal, the co-founder of Coin­Switch, declin­ing to give fur­ther details. 

“We are on a mis­sion to evolve into a wealth tech plat­form by the end of this finan­cial year,” Sing­hal told Forkast in an emailed response to ques­tions. How­ev­er, “We will con­tin­ue to be cryp­to first and inno­vate our cryp­to offer­ings as a com­pa­ny,” he said.

Coin­Switch has 18 mil­lion reg­is­tered users and does not share prod­uct-wise user data, Sing­hal said.

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