TLDR
- Coinbase is actively working with Indian regulators, including the Financial Intelligence Unit (FIU-IND), to re-enter the market after stopping operations in June 2023
- Their competitor Binance successfully resumed operations in India in August 2023 after a seven-month ban
- India currently has a 30% tax on crypto income and a 1% tax-deducted-at-source on transactions
- Paul Grewal, Coinbase’s chief legal officer, recently joined the board of U.S.-India Business Council
- India’s government is reassessing its crypto regulation approach, with a discussion paper expected in September 2024
Cryptocurrency exchange Coinbase is making active efforts to re-enter the Indian market following its departure in June 2023. The company is currently in discussions with various Indian authorities, including the Financial Intelligence Unit (FIU-IND), according to sources familiar with the matter who spoke on condition of anonymity due to the private nature of the talks.
The move comes as India’s cryptocurrency landscape shows signs of change. The government is currently reviewing its approach to crypto regulation, with plans to release a discussion paper that was originally scheduled for September 2024. This reassessment appears to be influenced by policy shifts in other countries, including recent developments in the United States.
Coinbase’s previous attempt to establish operations in India ended quickly in 2022. The exchange had launched services with support for the United Payments Interface (UPI) system, but had to suspend operations after just three days when India’s National Payments Corporation declined to acknowledge their presence.
Brian Armstrong, Coinbase’s CEO, later revealed that the company faced “informal pressure” from the Reserve Bank of India, leading to the trading halt. While cryptocurrency trading remains legal in India, many banks avoid working with virtual asset companies to maintain good relationships with the central bank.
The timing of Coinbase’s potential return depends on securing necessary approvals, including an operating license from the FIU. This process follows the path of competitor Binance, which successfully resumed its operations in India in August 2023 after a seven-month ban due to compliance issues.
Indians Crypto Market
The Indian crypto market currently operates under strict tax regulations. Since 2022, the country has imposed a 30% tax on crypto income and a 1% tax-deducted-at-source on all crypto transactions. These measures have affected market growth, though India maintains one of the largest web3 developer communities globally.
A Coinbase spokesperson expressed optimism about the Indian market, stating that the company “is excited by the opportunities in the Indian market and intends to comply with applicable regulatory requirements.” However, they did not provide specific updates regarding their FIU registration status.
In a related development, Paul Grewal, Coinbase’s chief legal officer, has joined the board of directors of the U.S.-India Business Council, part of the U.S. Chamber of Commerce. Grewal highlighted India’s growing importance in the web3 ecosystem, noting that the country’s share of global web3 developers has increased fourfold to 12% since 2018.
The potential re-entry comes at a time when Coinbase is expanding its international presence. The company recently received authorization from the UK’s Financial Conduct Authority for its subsidiary, CB Payments Ltd., to provide crypto services directly to UK customers.
India represents a key market for U.S. tech companies, though its crypto sector remains relatively small. The market gap widened after local exchange WazirX lost approximately half its reserves in a security breach. Currently, CoinSwitch and CoinDCX, both backed by Coinbase, lead the Indian crypto exchange market.
The regulatory landscape continues to evolve as the FIU previously declared several exchanges, including Kraken and Binance, were operating illegally in India. Many of these firms have since complied with FIU requirements, which include broader disclosure of user activities.
Coinbase’s interest in re-entering India aligns with comments made by CFO Alesia Haas at a recent Goldman Sachs conference regarding the company’s international expansion plans. The exchange appears to be following a careful approach to ensure compliance with local regulations this time around.
The Indian government’s ongoing review of its crypto policies may influence the timeline and conditions of Coinbase’s return. The revision of the discussion paper suggests a possible shift in the regulatory approach to digital assets in India.
Local banks’ cautious stance toward crypto firms remains a challenge in the market. Despite cryptocurrency trading being legal, financial institutions’ reluctance to serve digital asset companies continues to impact the sector’s development.
The current market leaders, CoinSwitch and CoinDCX, maintain their positions while Coinbase works through the regulatory process. Both exchanges have benefited from Coinbase’s backing while building their presence in the Indian market.
