Indian crypto industry still too small for government to expedite regulations, flag exchanges

Crypto

Domestic venture capital support has dried up for the Indian web3 and crypto ecosystem amid regulatory uncertainty, warned India’s top exchanges, including Binance, CoinSwitch and CoinDCX at India Blockchain Week in Bengaluru.

The exchange founders said the industry is still not big enough for the government to work on regulations faster.

“For government to care and get regulations early, this industry needs to be much, much bigger. Today, as exchanges, we are talking about metrics like volumes, users, MAU, and DAU. But I think we need to start talking about how users’ life is changing using these ecosystems,” said Ashish Singhal, Co-founder, CoinSwitch, during a panel discussion.

“There’s a disconnect,” said SB Seker, Head of APAC, Binance, adding that although India is seen as the market with highest crypto adoption in terms of consumer trends, but the developer trends and maturing of the Web3 ecosystem has been on a different trajectory when compared to other regulated APAC regions such as Japan, South Korea and the UAE.

Ultimately, it will be the government’s “national interest” on how they would want to approach the regulatory function, he said.

Singhal also emphasised on the need to build blockchain-based use cases that will become a part of the daily needs of users, making their lives better, to make crypto regulations a priority for the government.

He added, “While we continue to push for regulations time and again, to regulate the entire sector, it needs to impact more users and more daily problems. More use cases need to come up which solve their daily problems.”

Why web3 will be the future of DPI

Singhal believes that with concepts such as Infosys Co-founder Nandan Nilekani-backed Finternet which is pushing for asset tokenisation, the overall blockchain and web3 ecosystem will find wider acceptance in India’s digital public infrastructure eventually.

“Web3 is the direct next step in this evolution. If anyone, India can build and show the world a model in which a Web3-based ecosystem can scale to hundreds of millions of users. It can be used daily, repeatedly, across the country, even in the remotest part, he said.

Web3 funding drying up

While unveiling the India Web3 Landscape Report 2025, Sharanya Sahai, vice president, Hashed Emergent, shared that Indian web3 startups raised around $653 million in funding across 45 deals in the first 10 months of 2025.

But it’s not from domestic venture capital, which continues to remain slow. It’s the other larger ecosystem players such as Aptos, CoinSwitch, and CoinDCX, who are funding these startups, Sahai said.

“There’s been a revival of Series A deals, which were lacking in the last 2-3 years,” he added.

Both CoinDCX and CoinSwitch started web3-focused venture capital funds a few years ago.

Sumit Gupta, Co-founder and CEO, CoinDCX said, “When we started in 2018, we found it very, very hard to get Rs 1 crore of seed capital. And we had to slash our valuation down to a very, very low number. That was our valuation in 2018.”

CoinDCX recently crossed $2.45 billion in valuation after a funding from Coinbase Ventures.

“Today, I know that there are hundreds and thousands of students, entrepreneurs who are going to be starting web3 ventures. But they are facing challenges of VCs not understanding the categories. Long term venture capital is not there in India. And if some international VC is there, then they will want the startup to set up their base outside, which does not add to the Indian ecosystem,” Gupta said.

In the last four years, CoinDCX Ventures has funded around 20 companies, with cheque sizes ranging from $100,000 to $500,000.

“We not only bring money to these innovators, we also bring tons of experiences, tons of guidance that they would otherwise not get by directly raising from what we see in India,” said Singhal.

CoinSwitch’s web3 fund has backed over 25 companies in the last two ye,ars and its initial cheque size of $250,000 has grown to $2.5 million per cheque.

“We have funded companies that are building Google for the blockchain space. We have funded companies which have done influencer management or tokenization on all influencers on their platform. So that the users can show their love, appreciations to those influencers,” Singhal said about the interesting use cases in his portfolio.