Crypto in India: The Industry Perspective. Sumit Gupta in conversation with IIMA

The topic of cryptocurrency in India has been a spotlight topic for the last couple of years, especially after the lifting of RBI’s banking ban by the Supreme Court in March 2020. That is when the mass adoption started to take shape and people were stirring up the hushed questions to the Indian exchanges and on Google search! 

Being the pioneer of the crypto industry, CoinDCX has always believed that it is important to educate the mass about the new asset class along with providing them seamless investing and trading experiences. Adhering to that, CoinDCX has structured its policies and its products with industry best practices while keeping in mind the various possibilities and huddles that the crypto industry might face. 

To talk more about the crypto space, what is happening in the sector, and how the Government regulations will help structure it better, Sumit Gupta, CEO, and co-founder of CoinDCX joined the IIMA’s Public Policy Alumni Special Interest Group webinar series with Kamal Gaur, who is an expert himself. Let us take a deep dive into the webinar and learn about all of it!

How crazy is running a Crypto Exchange, especially in a place like India where there is so much potential? 

It is very exciting but also challenging at the same time. I usually spend my weekdays with the regular office work and keep my weekends for interviews, help build the team grow, and sometimes talk to customers. On various occasions, I also visit different colleges. Just like the crypto markets are running 24×7 you also have to be on your toes 24×7. 

One interesting thing that people say is you know that one year in crypto feels like two to three years in other industries. I can feel that rush sometimes, it’s full of challenges, of ups and downs. I remember when we were about to launch the exchange back in 2018, three days before that RBI’s banking ban circular came up which prohibited banks to work with crypto businesses. Due to that, we had to change things overnight and after that bitcoin prices started falling down and banks were creating challenges so we had to switch to a P2P model.  These challenges, are part of life now so you have to be on your toes 24×7.  

One interesting thing that people say is you know that one year in crypto feels like two to three years in other industries.

Plus you also need to stay very competitive because you are in a business which is growing really fast! Crypto fundamentally is waterless so you have to catch a pace not just with the innovations happening within the country but also what is happening outside. All of these different challenges are multi-dimensional in nature and I think that just makes the whole startup journey even more exciting and full of learning. I think it is one of the phases in my life where I’ve learned the most and if you are into crypto you have to really believe in it otherwise it’s very easy to give up. It is an emotion that keeps you going. If you look at a graph, on the x-axis its survival, you have to survive, you have to keep going you have to keep running and on the y-axis, its innovation, you have to keep innovating amid all of these uncertainties. All of this makes the journey very interesting. It is even more interesting when you’re operating in a country like India.

If you look at a graph, on the x-axis is survival, and on the y-axis, it’s innovation.

Since the RBI circular a couple of months back in 2021, where they stated that banks cannot quote the 2018 RBI circular anymore, how has the ecosystem changed from an exchange point of view?

Let us step back a little to understand what had happened in the crypto space in this context. Three important things happened. On the 6th of April, 2018 RBI came up with the circular which prohibited banks or regulated entities to work with crypto businesses.

It was not a ban per se it was a banking bank where banks were prohibited to work with crypto exchanges, but people could still buy and sell. But the nature of the industry is such that if people want to go from a fiat economy to a crypto economy banks are the only way. You cannot do those transactions without the banks in place. That was sort of a drawback. People could not do that so exchanges had to shift to innovative ways like a peer-to-peer way of buying and selling cryptos. On the 15th of August, 2018 CoinDCX launched our product called DCX Insta where two people could directly buy and sell with each other in a matter of a minute or so. We had to constantly fight with those sorts of challenges along the way. And after almost two years the Supreme Court judgment came forth as the IAMAI along with the industry participants and CoinDCX petitioned in the revoking of the Banking ban case.

On the 15th of August, 2018 CoinDCX launched our product called DCX Insta where two people could directly buy and sell with each other in a matter of a minute or so.

After that what was happening was when we were approaching banks, in their bank account opening form certain lines stated that you have to confirm that you are not operating in a virtual currency business or all of those things were there as ultimately they have to report back to RBI. So when we would approach banks, they would hesitate, even after the Supreme Court verdict, as the RBI had not shared any definitive circular with them. That was where the whole confusion was. 

Banks had never had a problem with the crypto space, they have always been open. It’s just that they were stuck in between where RBI has not given them any further instructions and the crypto exchanges saying that the Supreme Court is with us and the 2018 RBI circular is no longer valid. Because of this problem, everyone started approaching the RBI, and RTA’s were filed asking them what is the reality. So they had to come out with the 2021 circular, which stated that banks cannot quote from RBI’s 2020 circular anymore. It is now the banks’ responsibility to take forward the customer due diligence. 

How is integration with other FinTech like PayTM, Mobikwik, GPay? What role do you see them playing, either as a gateway or as crypto industry participants? 

I genuinely believe that these traditional FinTech players will be bringing in the next set of customers. If we keep the aspect of the prices aside because the prices will be bringing in a lot of interest, these traditional FinTech companies have a big role to play in crypto adoption. They are also going to play a very important role in this shift from fiat to crypto. As they already have the distribution channels sorted, they can quickly onboard customers. This will just make the experience for the customer simpler! I think very soon these companies will be opening the floodgates to crypto in the country. 

How is the talent pool in the country? As blockchain has not been around for the longest time, how easy or difficult it is, to find talent while you were building up your exchange?

Hiring is always challenging, no matter which industry you belong to. Even more so, when you are a start-up. When it comes to crypto, you do not only hire people interested in technology, but also those, who are genuinely interested in the crypto space. India does not really have a wider reach for Blockchain technology, so anyone who is in the technology space, the area of Blockchain might just be beneficial for you, say three years down the line. There are also few extremely passionate people, who are willing to join this space irrespective of how much they are getting outside. So that is also something very exciting. 

Can you share some light on how the crypto exchanges are adapting to KYC, AML, and other policies?

Crypto is an unregulated space in India. So if you go by the laws, there are no KYC guidelines given to the exchanges to follow. But you will see that the crypto exchanges in India do have a protocol in place. They verify the identity, PAN card, Adhar card, bank account number, to make sure that the money is coming from the correct account only. The protocol keeps getting improved over time. On a global level, there are various tools that people follow. For example, in CoinDCX we use an on-chain monetary transaction tool, where we verify from where the crypto is going and to where the crypto is going. So if there are any risky transactions taking place, say from a stolen wallet, the exchange gets to know about it and also track it to its origin. 

Which countries do you think are at the forefront of crypto regulations, which are going to help not only the people but also the industry?

I think countries that have taken a positive step in this direction are UK, Singapore, Japan, Australia, Canada… Japan is very progressive, for crypto assets as well as exchanges. We have also seen El Salvador announcing Bitcoin as a legal tender. So overall I think the progressive countries are more open to crypto. 

There are various acts in place for countries like Singapore, which helps in the smooth transactions of cryptos. It is evident that the more you want to curb innovation, the more it will push one country to lag behind. Rules and regulations should be built around the innovations for any country to thrive. 

About Sumit

Sumit Gupta is the Co-Founder and CEO at CoinDCX, India’s Largest Crypto App in India. Having a proclivity towards entrepreneurship from a very young age, his goal is to enable financial inclusion via crypto. Sumit advocates the adoption of blockchain technologies and believes they can do great things for humanity.