Crypto exchange Coinbase plans India re-entry after regulatory setback
What's the story
Coinbase, a leading US-based cryptocurrency exchange, is planning to resume operations in India after over a year-long hiatus.
The company is currently in talks with a number of Indian authorities, including the Financial Intelligence Unit (FIU), TechCrunch reported citing anonymous sources.
The move comes after rival platform Binance successfully resumed operations in India last August after a seven-month regulatory pause and subsequent registration with the FIU.
Past experience
Coinbase's previous attempt in India
Coinbase's first attempt at entering the Indian market in April 2022, was short-lived.
The company had launched services with support for the United Payments Interface (UPI) system but had to suspend them just three days later.
This was because India's National Payments Corporation, which oversees UPI, did not recognize Coinbase's operations.
The timeline for Coinbase's possible relaunch in India depends on obtaining necessary approvals, including a license from the FIU.
Regulatory challenges
RBI's 'informal pressure' led to Coinbase's trading halt
Brian Armstrong, CEO of Coinbase, revealed that "informal pressure" from the Reserve Bank of India (RBI) played a major role in their trading suspension.
Although cryptocurrency trading isn't illegal in India, many lenders are reluctant to associate with virtual asset firms.
The reluctance stems mainly from the fear of upsetting the central bank, several entrepreneurs and investors have said in the past.
Expansion plans
Coinbase's global expansion and Indian crypto market
Coinbase's interest in re-entering India comes in line with its broader international expansion strategy, CFO Alesia Haas said at a recent Goldman Sachs conference.
Although India is a critical market for US tech firms, the cryptocurrency sector in the country is still relatively small.
This is partly due to a 30% tax on crypto income and a 1% deduction on each transaction introduced by the Modi government in 2022.
Market impact
Coinbase's potential role in India's crypto market
Coinbase's return could also fill the gap left by the collapse of Indian exchange WazirX, which lost nearly half of its reserves in a major hack.
Presently, CoinSwitch and CoinDCX are the top Indian crypto exchanges, both backed by Coinbase.
Notably, Paul Grewal, Coinbase's chief legal officer recently joined the board of directors of the US-India Business Council. This could make Coinbase's re-entry into India easier.