Two of India’s largest crypto exchanges – CoinSwitch Kuber and WazirX – have halted deposits in Indian rupees citing regulatory problems, triggering a wave of angry protests by investors on social media. It comes two days after Coinbase halted deposits in Indian rupees on Sunday, barely 3 days following its launch in India on April 7.
The regulatory problem mentioned by these exchanges is a euphemism for the denial of instant retail payments services through the Unified Payments Interface (UPI).
Although denial of UPI and other payments settlement issues have been bogging down the Indian crypto exchanges for quite some time, the problems came to a pass after e-wallet MobiKwik stopped servicing the industry following the NPCI statement on Coinbase, media reports said on Wednesday.
At the time of its launch, Coinbase claimed support for UPI for deposits in Indian rupees. But the National Payments Corporation of India (NPCI) refuted the claim in a statement, saying NPCI was “not aware of any crypto exchange using UPI.”
In October 2021, CoinSwitch Kuber became India’s first unicorn valued at $1.9 billion in a $260-million Series C funding round, notably from Andreessen Horowitz (a16z) and Coinbase Ventures. At that time, Ashish Singhal, Co-founder, and CEO of CoinSwtich Kuber, said he was aiming for 50 million users in two years, from the existing 15 million users.
Binance-owned WazirX is considered the largest crypto exchange in India by volume. In 2021, it reported $44 billion in trading volume and saw its users grow 10x to 10 million. A valuation of WazirX has not been formally done yet, but industry experts believe it has crossed the unicorn status.
Sharp Fall in Trading Volume After Crypto Tax
The decision by CoinSwitch Kuber and WazirX to halt deposits until regulatory clarity is available comes in the wake of a sharp fall in trading volume since April 1, when the recently-introduced crypto taxes kicked in. CryptoPotato reported that transaction volume on India crypto exchanges on April 1 and 2 had dropped by 15% to 55%, while domain traffic fell by up to 40%.
A report in The Economic Times on Tuesday said major crypto exchanges hit a six-month low on April 10.
“Trading volumes on top crypto exchanges (normalized for the last one year) slid 92-98% on April 10 at one point compared to peaks observed last year, data from cryptocurrency aggregator Coingecko.com showed,” the news report said.
Growing Woes for Crypto Exchanges
What brought the matter to a pass for Indian crypto exchanges was MobiKwik suddenly stopping its services to crypto users in the aftermath of the NPCI statement on Coinbase. Some media reports claimed that MobiKwik stopped wallet services to digital asset users on April 1, the beginning of India’s new financial year 2022-23.
MobiKwik has not offered any official statement. The firm and other payment aggregators use UPI, and many crypto investors utilized their services to bypass NPCI’s informal embargo on exchanges.
While Coinbase allowed its India users to sell through IMPS (Immediate Payment Service), another NPCI product enabling quick transfer of funds, the exchange as well as WazirX have disabled all NPCI payments services, including IMPS, NEFT, and RTGS.