The Indian crypto industry is in the midst of multiple challenges as it grapples with 30 percent taxation and withdrawal of support by banks, which has hampered transactions on platforms. Even as exchanges struggle to keep payment methods live on their platforms, CoinDCX’s fundraise has bucked the trend.
The platform’s valuation has doubled to $2.15 billion after its
$135 million Series D fundraise, eight months after it turned unicorn. The round was led by Pantera and Steadview with participation from investors such as Kingsway, DraperDragon, Republic, and Kindred. The round also saw existing investors such as B Capital Group, Coinbase, Polychain, and Cadenza increase their investments, the company said.
In an interview with Moneycontrol following the announcement, CoinDCX’s co-founders Sumit Gupta and Neeraj Khandelwal said that international expansion is on the company’s radar, while it continues to build for the Indian market.
Gupta, who is also the CEO of the company, said that he expects disruptions in payment modes to be temporary. These disruptions began after Coinbase’s public announcement allowing UPI on its platform, to which NPCI responded by saying that it was not aware of any crypto exchanges using UPI. Banks since then have been more cautious about openly associating with crypto exchanges.
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“NPCI’s statement did make banks want to take it slow and now discussions are ongoing. But very soon we’ll see all of it going back to normal because banks fundamentally want to work with crypto companies,” says Gupta.
With plunging volumes making it difficult for smaller exchanges to sustain, Gupta also believes that the industry will soon see a consolidation, perhaps even before the end of this year.
Edited excerpts from the interview follow:
This fundraising announcement comes at a very crucial time as exchanges are facing a tough time. Over the last few weeks, we have seen how trading volumes have dropped after the taxes and the payments fiasco. What’s the action plan going forward?
Sumit Gupta: Yes, this is a very crucial time. The market overall from a regulatory perspective is going through ups and downs in terms of volumes. But I think when we look at the larger picture from a long-term view, all of this really does not matter. Ultimately, we believe that India is going to be the Web3 hub of the globe. And there’s so much development happening on the ground in terms of new entrepreneurship and from Web2 to Web3.
On the fundraising part, CoinDCX has grown leaps and bounds in the last 12 months. We have gone anywhere between 20 times to 100 times in calendar year 2021, depending on the metric. In January 2021, we were at around 200,000 users and right now we’re at around 12.5 million. It’s just like a testament to our products. We have made buying and selling of crypto extremely simple, the kind of innovation we have done in terms of new products we recently launched with a crypto investment plan and so on.
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Eventually, we believe that the space is going to be regulated and India is going to come out as the winner and investors are going with that vision. We have investors who understand the space. They have seen these companies or the same story playing out in other geographies and they know that every country has gone through the same trajectory I’ve seen and learned that the best companies in the world are built in the toughest of times. So, when times are tough, we actually solve for the worst, and then new things are fundamentally very strong. Overall, this funding round is going to give a good boost to the ecosystem.
Where will you be deploying the funds because trading volumes are very low at this point? A lot of people have been saying that hopefully this is temporary. But we have no idea how long that may take.
Plus of course the technology is still nascent and ever changing. We want to be at the top when it comes to innovation. We will hire more engineers. We will triple our engineering base from where we are, and focus more on technology innovation, so that we are ahead of the curve.
How much do you plan to increase your employee base by?
Neeraj Khandelwal: We currently have 400 people in the team, and we intend to take it to more than 1,000 by the end of 2022, including operations, engineering, compliance etc. There will also be a focus on content and marketing.
Sumit Gupta: We are also planning to build an Innovation Hub, where we will look at how we can nurture the ecosystem, help developers, have learning sessions etc. The details are still a work in progress. Solving the issue of talent supply-crunch is also very important for the industry in general and we will work on solving that as well.
We understand you already have a DCX venture firm and you have been investing into Web3. But, at the same time, these Web3 startups are moving away from India. Your comments.
Sumit Gupta: It’s quite an unfortunate situation where new startups that are coming out of India are not de facto thinking of India as the base. They are exploring other geographies like Dubai, Singapore, which are fit for crypto. But, India is a technology powerhouse with developers and engineers. And this talent pool is pretty unique in itself. When global companies think of expansion, they think of setting up India as the base to attract this pool.
I fundamentally believe it is the right policies and frameworks that can attract and retain this kind of talent. Eventually, in the long term, we all believe that India is going to regulate crypto, until that time we are self-regulated. But, India should definitely figure out ways to stop this trend.
With the top exchanges struggling with the dip in trading volumes, how will the smaller ones survive?
Sumit Gupta: There are a few exchanges with a significant market share and there are a lot of small exchanges that started out in the last 2-3 years. I think there is going to be some consolidation this year and maybe early 2023. If they are not able to pick up the volumes and solve the real problems of the end users, it is going to be difficult for them to get more market share.
We understand that allowing UPI on crypto platforms is still being discussed with NPCI. But meanwhile normal payment options like bank transfers are also hampered. From what we know, bank transfers on CoinDCX are available only to a few customers. Do you think we will have to wait for regulations for this to get back to normal? What are the discussions currently on to fully restore payment methods?
Sumit Gupta: I don’t think we’ll have to wait for regulation. Regulations will take their own sweet time, it is not a very easy problem to solve. It (payment disruptions) is just temporary. In the coming weeks or months, we will see all of that getting resolved and the situation returning to normal. Yes, there was some confusion. NPCI’s statement did make banks want to take it slow and they were not very comfortable opening up. Currently discussions are ongoing. But very soon we’ll see all of it going back to normal because banks fundamentally want to work with crypto companies. Banks are also in a situation where they have to decide how to take this forward in the absence of regulation. Discussions are on with the RBI, NPCI etc. While that will take some time, restoring payment modes to what they were earlier should not take much time.
How are you preparing for the impact on volumes when the 1 percent TDS comes into effect on July 1?
Sumit Gupta: From a product or a technical perspective we are pretty much ready for that. Fundamentally, as a company, we have to implement whatever the government says. But in parallel, we are trying our best in terms of communicating how this 1 percent TDS is going to impact volumes and in turn impact the revenues of the government as well. We are also trying to communicate how this TDS can drive a lot of activity to either foreign exchanges, P2P exchanges or even to channels where there is less supervision and control.
People trading on exchanges like CoinDCX is beneficial for the government because the government now has full visibility of what people are doing, what the trading volume is etc. But that can also be achieved with a much smaller percentage of TDS.
Since CoinDCX is registered in Singapore, are international markets also on your radar? Considering that India has no clarity at this point?
Neeraj Khandelwal: International markets are certainly on our radar. We want to expand globally, but not because India is an uncertain market. Uncertainties are there across the globe since this is a nascent industry. Because we have a very solid technological base, we believe that the technologies that we have built can be scaled to global markets.
Which markets will you be looking at?
Neeraj Khandelwal: We will look at favourable markets. We have not yet doubled down on strategies, but markets such as Europe and Southeast Asia are favourable. Dubai and the rest of the Middle East are emerging markets. Australia is again a good market.
Sumit Gupta: India is still a very nascent market, there is still a lot of work that we have to do here. We want to be a company born out of India and serving the globe, that’s our ambition. 
