Nascent but growing crypto-universe under threat from proposed crypto ban

Fears are rife about the future of cryptocurrency industry in India. Offering little foresight, the government is working on a cryptocurrency legislation that may or may not allow cryptocurrencies like Bitcoin to flourish here. There is, however, some confidence that the Centre will allow, rather, promote, innovations around blockchain, the underlying technology for Bitcoin.

“We are very clear that we are not shutting off all options,” Finance Minister Nirmala Sitharaman said in a virtual conference on March 15. “My view on this is that of course the Supreme Court had commented on cryptocurrency and while the RBI may take a call on official cryptocurrency but from our side, we are very clear that we are not shutting off all options,” she said. The RBI held a ban on crypto-trading from 2018 up until March 2020, when it was struck down by the Supreme Court.

However, since the comments by the minister, there have been reports that the RBI is “strongly” recommending a blanket ban, based on its view that untraceable crypto currencies aid terror financing and money laundering. Should that view prevail, India stands to lose not only millions or billions of dollars in Bitcoin wealth-creation, but also investments that are likely to come ininto Bitcoin-related start-ups.

Although Bitcoin has been popular in the retail community, which has benefitted from its meteoric price rise lately, there is a nascent but growing industry coming around it. Business Standard looked at some of the biggest crypto-ventures in India, and ones whose fate will be squarely decided by the new law.

WazirX

Founded: 2017

Founder: Nischal Shetty and Sameer Mhatre

Funding: Less than $1 mn from Kalaari Capital and angels; acquired by Binance in 2019

Annualised Revenue: $344,000, as of December 2019 (Tracxn)

After stating out as an underdog, WazirX has become a preferred choice of cryptocurrency investors. In the early days people flocked to WazirX for its nifty tech that enabled transections to go through smoothly. It was also one of the few to launch on Android and iOS simultaneous. It even introduced its own crypto-token WazirX token (WRX) — something to play around with for nascent traders.

However, it still came as a shock to many that Binance, the world’s biggest crypto-exchange, choose the young firm as its first and only acquisition in India. The deal size was estimated to be $5-10 million.

To be sure, 2019 was the time when crypto-trading was banned in India. Since the Binance deal, things have been looking up. The ban on crypto was lifted early 2020, and WazirX was rightly positioned to gain from the resurgence in activity. Co-founder Nischal Shetty announced February that WazirX hit $2.3 billion trading volume in the month, its highest ever.

With backing from a global partner, WazirX is trying to go deeper into the nascent community and back upstarts. It has recently setup a $50 million fund to incubate and invest in blockchain projects and startups focused on solving industrial and social problems through the use of blockchain technology.

CoinDCX

Founded: 2018

Founders: Sumit Gupta and Neeraj Khandelwal

Funding: $19.4 mn; Temasek, Coinbase Ventures, Block.com, Jump Ventures, others

Annualised revenue: Could not be determined

CoinDCX is the most-funded startup in the space, which is not the only thing that distinguishes it from the lot. CoinDCX acts as an aggregator of trading services. Instead of buying cryptocurrencies with fiat on one platform, trading across currencies on another, and trading with leverage on a third – CoinDCX sustains and operates multiple instruments – through a single gateway.

What this means is that one can trade in over a 100-plus crypto-currencies and through many of the global exchanges through one CoinDCX account. It also offers the facility for margin-trading and trading in futures. A latest product called Lend, offers credit facility.

In the absence of use-cases for cryptos, platforms have been innovating to offer value over and above the market gains from holding crypto-currency. In that regard, CoinDCX offers a “saving account” for holdings- just like depositors earns interest from keeping their money in the bank, CoinDCX has a product that pays interest (in crypto-currency) to account holders. It is now said to be developing a stand-alone Bitcoin and crypto-investment app.

Coinbase Ventures, the investment arm of $68-billion Coinbase, is an investor in CoinDCX.

Unocoin

Founded: 2013

Founders: Sathvik Vishwanath, Harish B V, Abhinand Kaseti and Sunny Ray

Funding: $6.7 mn from Draper Associates, Blume Ventures, ah! Venture, Mumbai Angels, others

Annualised Revenue: $265,000 as on December, 2019 (Tracxn)

Unocoin holds the title of the first entrant into India’s Bitcoin space. An early-mover, the product was created to serve as an BTC-INR exchange, where people buy and sell Bitcoin, as well as a wallet to store the crypto-tokens. Unocoin said in October 2020 that it was valued at $20 million.

The company has also created value-added up over-and-on top of Bitcoin, such as Bitcoin Systematic Buying Plan (SBP), cryptolending, crypto interest-earning, Bitcoin Point of Sale (POS) App and Bitcoin Over-The-Counter trading (OTC). At its peak, Unocoin said it processed transactions worth more than Rs2,000 crore a month for over 1.3 million users.

Early on in its life, Unocoin roped in prominent early-stage VC Blume Venture. More recently, about it rebooted when the government lifted the ban on crypto currencies, it raised money from storied US investor Tim Draper (Draper Associates). The founders were also key petitioners to the courts to challenge Reserve Bank of India’s 2018 to ban crypto currencies.

Unocoin currently offers trading for only three cryptocurrencies, namely, Bitcoin, Ethereum, and Tether. It ranks 355 on Coinranking, a portal than ranks crypto-exchanges based on trading volume, marketshare and users.

CoinSwitch

Founded: 2017

Founders: Ashish Singhal, Govind Soni and Vimal Sagar Tiwari

Funding: $16 mn from Ribbit Capital, Sequoia Capital India, Kunal Shah, others

Annualised Revenue: Could not be determined

Among the things it is known for, CoinSwitch is famed for raising money from Ribbit Capital, a key fintech investor in India with bets in Cred, Capital Float, Razorpay, among others. Sequoia Capital India is an early backer.

A reason for the favour is the pedigree of the founders, who have earlier worked at Amazon and Microsoft, and were regulars at tech hackathons.

In 2017, the company was founded as a global aggregator of cryptocurrency exchanges, and in 2020 it launched CoinSwitch Kuber, a special app for Indian retail investors. The selling point of CoinSwitch is that it is fairly easy to use, according to its founder Ashish Singhal, who says it is “as easy as ordering food.” Among other features, it allows users to buy into Bitcoin for as little as Rs100, and while using a credit card.

According to Singhal, CoinSwitch has been a key beneficiary in the lockdown when people moved to alternative investments as stock-markets and bond yields dropped, and mostly led by first time uses in 25-35 years age-group. In December, the platform saw $5 million-worth of trades a day on certain occasions.

Unicas

Founded: 2020

Founders: Joint-Venture between United Multi State Credit Cooperative Society and London-based Cashaa, a blockchain fintech

Funding: Undisclosed

Apart from the exchanges, a new model is taking shape in the cryptocurrency world: Crypto-bank. Unicas is India’s first crypto-bank, and recently opened a physical branch in New Delhi. It is a joint venture between Jaipur-based United Multi State Credit Co-operative Society and UK-fintech Cashaa.

Apart from letting customers access crypto and fiat services at the bank, Unicas offers digital loans using crypt holdings as collateral. By the end of the year, the bank aspires to launch 50 branches across the country. According to its website, Unicas offers up to 9.67 percent annual interest on rupee as well crypto holdings.

It is as much a knowledge initiative as it is a financial institution. “In order to accelerate the understanding of crypto among common people, it also runs knowledge centers within their physical branches. These knowledge centers provide in-depth information to people on cryptocurrency, blockchain, and banking functionality. The entire model of the financial institution has been created to offer a next-gen experience of banking to users and also create awareness while bursting any myths,” said a company statement. There is no data of whether customers have signed up and loans handed out in public domain.