India’s crypto exchanges plan for long-term future

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

The products include efforts to earn interest on cryptocurrency deposits, and dollar cost averaging features 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 provides access to a range of decentralized finance (DeFi) apps.

“In India, the current conditions favor long-term investment products 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 imposed a flat 30% tax on all crypto earnings 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.

TDS has cut so-called scalp trading – buying and selling within seconds or minutes to profit from small price movements – as paying 1% on each trade erodes capital, Malhotra said Discard in an email response to a question.

“On the other hand, in long-term investment, 1% TDS does not matter as the rate of investment is too low to affect capital inflow to the user.”

Skeptical

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

The taxes and unfriendly regulators 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” about the country’s economy, is not sure that the strategy of spinning out new crypto products will work.

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

Long-term investment plans have been successful for stocks and other financial products, but if the underlying instrument does not inspire confidence, related products are unlikely to change that, he said.

That view doesn’t stop Indian exchanges from trying.

New ideas

CoinDCX introduced a yield-generating 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 Discard.

CoinDCX has approximately 2.5 million active users, with a total of 15 million registered online and other platforms, Thukral said, adding that the exchange has seen some slowdown in trading. He did not give details.

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

“We are on a mission to evolve into a wealth technology platform by the end of this financial year,” Singhal said Discard in an email response to a question. But “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-specific user data, Singhal said.