Coinbase India Re-entry: Crypto Exchange Plans Return to India

Coinbase Pursues Re-entry into the Indian Market

Coinbase is actively preparing for a return to the Indian market, over a year following the cessation of its operations within the nation possessing the largest population globally.

The American cryptocurrency exchange is currently in discussions with various Indian regulatory bodies, notably the Financial Intelligence Unit (FIU). This governmental agency is responsible for the oversight of financial dealings, according to two sources with knowledge of the ongoing, confidential deliberations.

Previous Challenges and Recent Precedents

Coinbase’s renewed efforts to re-establish a presence in India are occurring after a complex history within the South Asian market. Binance, currently the world’s leading cryptocurrency exchange, successfully resumed operations in India last August. This followed registration with the FIU after a seven-month period of regulatory suspension, setting a precedent for other foreign exchanges.

The exchange’s initial launch attempt in India concluded prematurely in 2022. Coinbase began operations with significant promotion in April of that year, integrating support for the widely utilized Unified Payments Interface (UPI) system.

However, the service was suspended just three days later when India’s National Payments Corporation, which manages UPI, declined to recognize Coinbase’s operations.

Regulatory Hurdles and Industry Climate

Brian Armstrong, Coinbase’s CEO, subsequently revealed that the company encountered “informal pressure” from the Reserve Bank of India. This pressure contributed to the halt in trading activities.

While cryptocurrency trading is not explicitly prohibited in India, many lending institutions are hesitant to engage with virtual asset firms. This reluctance stems from a desire to avoid conflict with the central bank, as reported by numerous entrepreneurs, investors, and officials.

The timeframe for Coinbase’s potential relaunch is contingent upon securing the necessary approvals, including an operating license from the FIU. The FIU had previously determined that several exchanges, including Kraken and Binance, were operating “illegally” within India.

(Many of these firms have since achieved compliance with the FIU’s requirements, which involve more extensive disclosures regarding user activity.)

Company Statements and Broader Expansion

“Coinbase is excited by the opportunities in the Indian market and intends to comply with applicable regulatory requirements,” a company spokesperson stated to TechCrunch, while declining to provide specifics regarding FIU registration.

This renewed interest in India aligns with Coinbase’s broader strategy of international expansion, as indicated by CFO Alesia Haas during a recent Goldman Sachs conference.

Furthermore, Paul Grewal, Coinbase’s chief legal officer, was recently appointed to the board of directors of the U.S.-India Business Council, an affiliate of the U.S. Chamber of Commerce.

“I’m honored to join the USIBC Board to help strengthen the bridge between India and the U.S. in shaping the future of finance,” Grewal stated in a USIBC press release. “India has one of the largest and fastest-growing web3 ecosystems in the world, with a booming developer community, pioneering startups, and bold institutional adoption. Since 2018, its share of global web3 developers has quadrupled to 12%, the highest growth among emerging markets.”

Market Conditions and Competitive Landscape

Despite its potential, India’s crypto market remains relatively small. This is partly attributable to the 30% tax imposed on crypto income and the 1% transaction deduction implemented by the local government in 2022.

A successful re-entry into India could address the gap created by the collapse of the Indian exchange WazirX, which experienced a significant loss of reserves due to a security breach.

Currently, CoinSwitch and CoinDCX are the leading Indian cryptocurrency exchanges, and both receive backing from Coinbase.