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Coinbase is trying to return and making moves to reenter the Indian market after more than one year of absence. The American-based cryptocurrency exchange is presently negotiating with the regulators of India, including the Financial Intelligence Unit (FIU), to get approval. This comes two months after Binance came back in August 2023 after a seven-month regulatory freeze.
Coinbase's first attempts to settle in India were hindered in April 2022. While the company initiated services supporting the United Payments Interface (UPI), it had to quit operations after three days. The Indian National Corporation refused to recognize the operation of Coinbase, leading to an immediate shutout.
Brian Armstrong, the CEO, would disclose that "informal pressure" was exerted by the Reserve Bank of India on banks to make it next to impossible to conduct business for crypto companies. While trading in cryptocurrencies is not illegal in India, banks, wary of upsetting regulators, refuse to contract with firms involved with virtual assets.
The Government of India has laid out draconian taxation on cryptocurrencies. With high taxation, traders have lost interest in crypto. A 30% tax on profits of such businesses and a 1% tax deducted at source (TDS) on every transaction sufficiently discouraged traders.
However, the country still remains home to one of the fastest-growing web3 developer communities, with its share of global web3 developers rising from 3% in 2018 to 12% in 2022.
The success of Coinbase's repatriation will largely depend on FIU registration and conformity to the regulatory laws of India. Unlike Coinbase, which may follow a road map provided by Binance's participation with local authorities.
As a strategic move, Paul Grewal, Chief Legal Officer at Coinbase, has recently joined the Board of Directors at the U.S.-India Business Council. This development may strengthen ties between India and the U.S. in securing crypto regulation.
The potential of Coinbase's reincarnation would act as a key change agent in the crypto market of India to fill up the vacuum created by WazirX, whose reserves were seized on account of security breaches. While CoinSwitch and CoinDCX dominate the Indian crypto market, both have backing from Coinbase.
With the introduction of Coinbase back in action in and with the Indian government relooking into its crypto policies, a lot of things will change for international exchanges working in India. That is, assuming its success is contingent on wading through the complex regulatory environment of the country.
