New Delhi India’s first crypto unicorn, CoinDCX, has raised $136 million in a Series D round with a valuation of $2.15 billion, almost double the $1.1 billion valuation in its last funding round of $90 million. Coinswitch is now the most valuable crypto platform in India, ahead of Kuber, which was valued at $1.9 billion in October. In an interview, CoinDCX co-founder and CEO Sumit Gupta explained why Indian investors are still bullish on the crypto ecosystem despite regulatory uncertainties. Edited excerpt:
Can you give us the details of the latest round of funding?
The latest round was led by Pantera and Steadview, with participation from Kingsway, DraperDragon, Republic and Kindred. There was a 6% dilution. After this round one third of the equity is still with the founders (Gupta and Neeraj Khandelwal), which I think is a very healthy position. The rest is with employees, in the form of an ESOP pool, as well as with investors. It was a heavily oversubscribed period. We were not planning to raise funds initially. It’s just that investors had faith in the Indian market and our approach. So, the deal was done, and we partnered with them from a long-term perspective. It is basically a testament to the fact that India can give birth to not just one or two unicorns, but dozens of unicorns.
How will you deploy the funds?
We are planning to come up with unique offerings of its kind in crypto and not just those that are limited to buying and selling. An example is a product that we launched less than a month ago, the crypto investment plan, which involves systematic investing over a long period of time. More than 100,000 people have already tried it. Plans will be revealed in the coming months, but products like this will get a lot of traction and that’s just the beginning.
We also want to work on the problem of talent supply. There are limited people in India who understand this space very well. There are a lot of foreign companies trying to tap the same talent pool. Hence, there is heavy competition and it is not sustainable in the long run. So, we are also trying to figure out ways to solve this talent problem. In addition, we plan to triple our team from the current strength of around 400 people by the end of this year. Recruitment will be in functions such as product, compliance, development and marketing, but primarily in engineering.
What is driving investor interest despite regulatory uncertainties?
Regulatory ambiguity will remain in the short term. However, investors do not take a one- or two-year outlook. They have a very big outlook. They are quite positive about the Indian market, especially because of the adoption rate in terms of newcomers to the space. These investors are not seeing regulatory issues for the first time. They have seen the same story playing out in western countries. First there is adoption, then the industry grows to a good level, then the government comes up with the right policies. Once that happens, the growth rate of the Indian crypto ecosystem will be mind-blowing.
Do you see any solution to recent banking problems?
I think the recent issue came to the fore after the Coinbase launch event, following which NPCI issued a circular on the use of UPI. I think banks are still willing to partner with crypto companies, but there is still some confusion or chaos that has arisen in the last few weeks due to which this UPI issue has arisen. But UPI has always been a challenge. We have always strived to have a seamless UPI system, but it has been on and off. As we speak, we are regularly in touch with various stakeholders on how to make the payment flow smoother. This is something we are actively working on and I think in the coming weeks or months, we will see some solutions to it.
What are your thoughts on the recent drop in trading volume?
Volume decline is global and is not limited to India. Of course, India faces challenges that have contributed to the decline. We have also seen a drop of around 30-35% in volumes in the last one or two months. The first reason is related to the market, where bitcoin has been trading flat over the past few months around the $39,000-40,000 level. The second is that top traders, who typically contribute 80% of the volume, have slowed down. Still, we have seen new people coming and joining our platform; However, the growth rate is not as high as it was a few months ago. The third reason is the prevailing confusion about the loss compensation share in crypto in India. Although there are tax guidelines, which is quite a positive sign, its interpretation is still not very clear.
What do you think are the challenges the government is facing in making rules?
I think the crypto space is a bit complex in nature. A major challenge is keeping up with the pace of the industry. Two years ago people didn’t even know about decentralized finance or non-fungible tokens. And I think it’s not a good idea to have a very rigid regulatory framework for a really fast growing space. The right way forward is to have soft-touch regulations. Another challenge is that, fundamentally, crypto is a global asset class, and you cannot limit it to one country or one jurisdiction. India is one of the few countries that have very strict capital controls. So how do we solve it? Further, the government needs to look at how Indian investors can be protected from volatility in crypto assets, to standardize Know Your Customer (KYC) guidelines across all platforms listing various tokens.