Large Indian crypto exchange CoinSwitch will focus on diversifying into a wealth-tech platform in the current financial year by launching financial services products such as fixed deposits, mutual funds and stocks trading on its platform, co-founder and CEO Ashish Singhal told FE.
“Coming to partnerships, (for) getting into a regulatory asset class, we would need a lot of support from banks, NBFCs and different partners. Since all of these products are in the making, I cannot disclose these partnerships. As we launch these products, we will give more details on partners and products…,” Singhal said. “I think there are many approaches… Getting ourselves a licence or working with a partner who already has a licence – these are parallel tracks that we are exploring. We are also talking with the regulators to understand how we can offer this with the best intention and the best user experience… as we launch these products, we will give more clarity on it.”
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The process of diversification comes at a time when the crypto market is gripped by bears and the underlying sentiment is conservative, Singhal said.
The price of one bitcoin, considered among the safest of crypto investments, soared to over $65,000 in November 2021. However, prices tumbled over the last year after FTX, the second-largest crypto exchange in the US, filed for bankruptcy. There were funding issues and market turmoil as well that plagued the sector, while the lack of regulation and accountability has shaken investors’ confidence in digital currencies and tokens. The price of bitcoin plunged 64% from its all-time-high to $16,630 in 2022. The year 2023 witnessed a turnaround, with the price reaching $30,000. It stood at $27,861.64 on April 23, 2023.
“Obviously, crypto is going through a bear market, and most of the asset classes are going through a bear market phase. In the bear market, new user acquisition is harder because there is fear and uncertainty. A new crypto investor will be a bit on the sideline, he will monitor and understand the market. So, I think the major effort for this year for us would go into education and diversification…,” the CEO said, adding that the user base of CoinSwitch has touched nearly 20-million mark.
CoinSwitch is planning to come out with an updated proof-of-reserve report soon, after releasing the first report in January this year, Singhal said. According to the report, the total value of user assets held by CoinSwitch as of January 6, 2023, was $131.09 million or a little over Rs 1,000 crore.
Global regulation of crypto
Finance minister Nirmala Sitharaman earlier this month said that the G20 member countries have agreed with India’s proposal for a coordinated global understanding to regulate crypto assets and a synthesis paper on it will soon be prepared. Singhal agreed with Sitharaman, saying crypto transactions can be regulated globally, on the lines of how banks use SWIFT messaging network for communication.
“I think there are multiple ways to do it (regulate crypto) and learn, and we do not have to reinvent the wheel. Look at how Singapore has done it, how the US is planning to do it, or even the MiCA (Markets in Crypto Assets) regulations which were passed last week in the European Union. This may usher in the biggest change in the European stance on crypto,” Singhal said.
“Exchanges like us become a key partner of the government on collecting and verifying users’ identity on our platform. Once users acquire these crypto and are willing to transfer it from one exchange to another or a wallet or another user itself, then we have to establish travel rules. It gives identity from one party to another, similar on the lines of SWIFT mechanism…,” he added.
CoinSwitch has registered as a reporting entity with the Centre’s Financial Intelligence Unit, under the ambit of the Prevention of Money Laundering Act (PMLA), 2002, Singhal said. “We are working closely with the FIU to be able to establish the rules under the ambit of the PMLA to all crypto aggregators or virtual digital asset providers in India. Only two partners have been selected by the government (for consultation) – CoinSwitch and WazirX…,” he said.