How crypto firms are hedging their bets amid regulatory uncertainties

Entering new countries: Check

Diversifying their product portfolios: Check

Facilitating peer-to-peer transactions: Check

These are some of the things that crypto exchanges in India are doing to minimise their risks at a time when they are yet to receive the blessing of the country’s central bank and have seen their trading volumes plummet after the government started taxing crypto assets from April 1.

To make things worse, the National Payments Corporation of India, which enables digital payments, recently expressed its reservations on the fund flows through the Unified Payments Interface (UPI) for crypto trades, putting a damper on the expansion plans of many crypto exchanges in India.

To combat the drop in trading volumes, India’s second crypto unicorn CoinSwitch Kuber plans to expand its offerings to include Indian mutual funds and equity products tied to US-listed stocks.

“There are discount brokerages and there are bank-based traditional brokerages. But we want to be something more than these two. Our vision in the next five years is to provide personalised suggestions using robot-advisory on what to buy or sell, when to buy or sell and why others in the market are trading a particular stock,” said CoinSwitch Kuber co-founder and chief executive officer, Ashish Singhal.

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The diversification made sense as most of the crypto exchange’s users were first-time investors who did not have exposure to other asset classes, Singhal pointed out.

“As they grow older, they want to invest in more stable instruments. That’s why we are venturing out in that space,” he said, adding that CoinSwitch Kuber still wanted to continue to be a crypto exchange first.

The move to diversify might be an uphill task, according to Sidharth Sogani, the founder and CEO of market research firm CREBACO Global, which focuses on all things crypto.

“I believe they will face difficulty in compliances and licences as a crypto company. But the good part is if they get it, they will pave the way for more web3 companies to get in this space,” Sogani told DH. Web3, often described as the future of the internet, is a decentralised iteration of the web that runs on blockchain technology.

Despite the potential hurdles and lack of experience in the new product categories, the move made sense as it was necessary for crypto exchanges to salvage trading volumes until there was regulatory clarity on crypto assets, according to Sogani.

Some crypto exchanges such as ZebPay have decided to venture into markets such as the United States and the United Arab Emirates while they wait for India to rethink its attitude towards the emerging asset class.

“In the US, we already have regulations in place. Because of this, businesses are investing in cryptocurrency, which will help us grow. UAE is an emerging market with respect to crypto,” ZebPay Chief Executive Officer Avinash Shekhar told DH earlier this year.

Meanwhile, like most other crypto platforms, Chennai-based Giottus Cryptocurrency Exchange is banking on peer-to-peer transactions to drive its business until the UPI issue is sorted out.

Peer-to-peer (P2P) trading is a type of cryptocurrency exchange method that allows traders to trade directly with one another without the need for a centralized third party to facilitate the transactions. P2P trading platforms work by matching buyers and sellers together to facilitate trading and take a fee for each trade conducted.

“Lack of UPI and crypto bear market have brought our volumes down but business is still happening. Peer-to-peer (trading) is still an option. That might affect our volumes but that will keep our business going. We hope to solve the UPI issue soon. This will help us surpass our normal trade volumes,” said Arjun Vijay, the co-founder and chief operating officer of Giottus.