In its bid to diversify beyond crypto trading, CoinDCX launched app aggregator Okto last week to enable users to access Web3 and Decentralised Finance (De-Fi) apps.
CoinDCX’s first global offering comes at a time crypto exchanges are experiencing a steep decline in trading amid a bear market and are under the Enforcement Directorate (ED) scanner for suspected money laundering through instant app-based loan transactins.
Moneycontrol reported about the platform’s global plans in April after it raised $135 million. The Coinbase-backed firm earlier launched a venture arm, CoinDCX Ventures, and created a dedicated fund of Rs 100 crore.
“We want to build the ecosystem in India. We didn't want to just build a company, to make revenues. The larger goal is how can we take India to a global stage and while that is happening, we be the catalyst in terms of making that happen,” said Sumit Gupta, CoinDCX co-founder and Chief Executive Officer.
Gupta also said that in the coming months, additional product features will be added that will simplify transactions for retail users.
Okto is set to be live in the next two to four weeks. At its launch, Moneycontrol spoke to Gupta and co-founder Neeraj Khandelwal about Okto and the crypto industry. Edited excerpts:
What sort of customer acquisition costs will be involved here, given that it is a global product?
Khandelwal: Firstly, a lot of our CoinDCX customers requested this offering and it will be natively available on the CoinDCX app also. But, sharing a particular number is difficult. It's always a bet that you take whenever you are launching a business or a new product or a subset. You are never sure about it. Long term, we are sure but short term, it is very difficult to say.
What typically happens is people go and buy crypto on centralised exchanges. Then they withdraw their assets, withdraw their cryptos to use on De-Fi or NFTs (non-fungible tokens), etc. With this addition of the product, customers won't have to do that. They will not need to withdraw their cryptos. A lot of capital movement constraints are there in India, right? It's a capital controls regime. So cryptos right now are very difficult; (there are) no crypto withdrawals with the taxation. We don't want people to take out cryptos but use their cryptos to use it forward.
The plan is not to spend on customer acquisition but to build for the next two-three years.
You also mentioned that an app store construct is in your mind. Give us some sense of that.
Khandelwal: So there would be lakhs of applications on Web3 and all these applications will need a private key account. We are solving it through Multi-Party Computation (MPC) technology as it removes the complexity of the customer. It's a very expensive technology not just in terms of capital, but it requires a lot of resources and time. Not everyone building those applications will do this. So we are building this and will open it up for other applications to be built on top of this. So it will be a simple login like Google, you can have one blockchain account with Okto and access all decentralised applications.
When it is a key-less access, how will you secure it?
Khandelwal: So far, you have a wallet, mobile app through which you access Web3. Wherever you register the wallet, it gives you the private key. Then the customer notes it and keeps it with him but that’s not scalable seeing the risks involved. We are dividing the key in three parts, one on the mobile phone and two on the Okto app. This in crux is MPC technology. It is encrypted by biometrics. So the customer need not even understand the key or worry about it, but just needs to sign in.
Okto will also provide access to many coins with high-yielding opportunities but we have seen how high yield has impacted the customers. Your take on this.
Khandelwal: High yields are always risky. If there is a high yield, that means there is a high risk which is very implicit, whether you see it or not. So, of course, customers are requested to observe caution and there ain't nothing more we can do about it. But on Okto and on CoinDCX, we do our own research, and then only expose things to the customers.
We have a risk management setup. There are at least six-seven tables just for risk management. There was a time when we faced a lot of competition from other exchanges which gave 15-18 percent returns, but we always stuck to 8-10 percent. As a team, we decided never to do that because it's a risky policy, so this was never allowed.
Overall customer acquisition costs were much higher over the past year in the crypto industry. Is that changing after the market crash?
Gupta: Trading volumes will fluctuate as per the market situation. What is important is to balance it out and not make mistakes, like hiring more people than needed or giving more discounts than needed. If you remain sane, it is not that huge a problem.
Has hiring been a problem after unfavourable market conditions set in? Have your plans changed or are still intact?
Khandelwal: We have a pipeline of 25,000 applications on our hiring portal. So no difficulty, and we have zero attrition. Now we are getting more quality people because, during the bull run, there was a lot of money floating in the market. Now we are getting people who are actually enthusiastic about the industry.
Gupta: We had set a target to hire 1,000 people this year. We will need a lot of people since we are building Okto and also doing a lot for increased compliance and for customer support. For the culture of the company, we want to ensure that every person joining us is doing so for the right reasons and not just for the money.
As compared to last year, the focus on profitability has increased much more. What are the conversations that investors are having with crypto companies? Coupled with the crash, is the pressure building on getting returns for every penny being spent?
Gupta: When we started the company, the market was extremely tough. We have come far from there. We want to be financially disciplined and make sure that all costs are right. We used to do that earlier as well, but now with even more focus. But regardless of what the developments are, it will not change our views on the space and that’s what matters more than the pressure on profitability. The moment you start (thinking) about making profits and optimising for that, you might end up doing things which are not in the best interests of the customers and we don't want to do that.
There are also instances in terms of crashes and freezing of assets. What kind of impact do you see of such instances on the industry?
Gupta: These crashes were unfortunate and these things can happen again. That is why we keep talking about how important education is.
If a product is giving us 20 percent returns, people should know about how they are getting those returns. It is important for customers to be aware. So that is where education fundamentally will solve the problem. While these events are unfortunate, I want to take some learning out of that. Some of the exchanges did not have proper risk management but we were very particular about that right from the start because we do not want users to suffer because of us. So, we do our job to be a responsible player.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
