Crypto regulations in India: More than a year ago, when FTX’s sudden demise bewildered the entire crypto ecosystem and pushed the market down the hill, hardly anyone imagined that the leading cryptocurrencies would be back on track, stronger than ever before. 

Today, when Bitcoin is right on the brink of breaking its all-time high, Balaji Srihari, Business Head of CoinSwitch Exchange, joins Republic Business to have a detailed conversation about what this Bitcoin bull run means for CoinSwitch and the wider crypto ecosystem. 

From crypto regulations in the country to spot Bitcoin ETF approvals in the USA, Srihari shared his opinion on a variety of topics and gave us insights into how CoinSwitch secures the assets of its customers. Following is the conversation between CoinSwitch’s Balaji Srihari and Republic Business. 

What change have you seen in our transaction volumes, since BTC has been rising? 

Balaji Srihari: I am not saying the floodgates have opened yet — more to come! But the doors are definitely shaking under the rush of activity. Just yesterday, 4x more users were trading on the CoinSwitch platforms as compared to the 2023 daily average. 

Our trading volumes surged 7x as a result. The excitement is very much fueled by BTC. Our data show BTC trading volumes alone have jumped 10x. 

We feel this is only the start of a bull run in crypto. A rising tide lifts all boats, and CoinSwitch users are certainly rowing merrily in this market optimism. In just the last two weeks, the number of users in profit has increased by over 80 per cent.

What is your opinion on the current taxation on cryptocurrencies in India? 

Balaji Srihari: The government introduced tax regulations for Virtual Digital Assets (VDA) during the 2022 Budget session, aiming to provide clarity on their taxation under the Income Tax Act. While this move was welcomed by the industry for its definition and inclusion of VDAs, certain provisions have prompted concerns among Indian users.

High Tax Deducted at Source (TDS) rates and the absence of provisions for offsetting losses have compelled many Indian VDA users to seek trading opportunities on non-compliant foreign exchanges. This trend not only exposes users to the risk of financial loss but also raises compliance issues with Indian tax laws, resulting in reduced tax revenues for the country.

CoinSwitch, a FIU-registered platform adhering to India's Know Your Customer (KYC) and Prevention of Money Laundering Act (PMLA) rules, urges the Government of India to consider revising the current tax framework for VDAs. Specifically, CoinSwitch proposes reducing the TDS rate on VDAs from 1 per cent to 0.01 per cent, allowing for the offsetting and carrying forward of losses from VDA transactions, and treating VDA income on par with other capital assets.

Implementing these changes could prompt a reevaluation of India's tax treatment of VDAs, aligning it more closely with international standards and mitigating the existing tax arbitrage. 

Do you think that after the US SEC’s approval of spot Bitcoin ETFs, more regulatory approvals will follow in other countries?

Balaji Srihari: The approval of the Bitcoin (BTC) ETF stands as a pivotal moment for crypto investors worldwide, a significant step towards legitimising BTC and the broader crypto market as a credible asset class. This marks the beginning of easy access for retail and institutional capital to be deployed into the space and will be a net positive for the sector in the long term. 

This will bring in a new wave of investors and so I am optimistic that regulators across geographies will see VDA projects in a positive light. 

What do you think about that and the overall crypto regulatory landscape of India?

Balaji Srihari: In my view, it's reasonable that regulators and government bodies are taking their time and implementing rigorous measures for Virtual Digital Asset (VDA) platforms. The crypto industry's history of dishonest players running questionable operations poses a constant threat to user safety. Therefore, India's cautious approach to defining and implementing crypto regulations is crucial for safeguarding user interests.

However, there has been a positive shift in the narrative over the years – moving from a stance of 'banning crypto' to 'regulating crypto.' This shift indicates a growing acceptance of crypto assets in the country. From the Advertising Standards Council of India's (ASCI) guidelines standardising advertising practices for crypto assets to the Prevention of Money Laundering Act (PMLA) notification designating Indian exchanges like CoinSwitch as reporting entities under the Financial Intelligence Unit (FIU), the regulatory landscape is evolving in the right direction.

Even during India's G20 presidency, there has been a strong emphasis on crypto assets. As an ecosystem, we may take our time, but we are poised to emerge as a more recognised and trusted industry. 

Tell us more about how CoinSwitch secures the assets of your customers.

Balaji Srihari: The security of user funds and personal data is a top priority at CoinSwitch. To guarantee the security of user accounts and transactions, we apply industry-standard security procedures- we are also SOC2 compliant. Additionally, our Proof of Reserves further establishes transparency and verifiability of our assets.

We apply extensive checks and guardrails to ensure users’ investments are safe and secure. 

How CoinSwitch is different from the rest of its competitors in the Indian market?

Balaji Srihari: CoinSwitch is India’s largest crypto trading platform with over 19 million registered users. We aim to provide a simplified crypto trading experience, while also ensuring user safety. Supporting our mission are some of the most reputed blue-chip investors including Andreessen Horowitz (a16z), Tiger Global, Peak XV Partners (Sequoia Capital India), Ribbit Capital, and others. 

CoinSwitch caters to both retail investors and advanced traders.  The CoinSwitch app is built to make crypto investing as easy as ordering food online, just as our retail users want it to be.