When? Binance Holdings Limited Bitterly parted ways with its Indian ally WazirX In 2022, the world’s largest cryptocurrency exchange looked almost unstoppable in the local market, while WazirX was floundering. Government crackdowns on offshore platforms have abruptly reversed competitive dynamics.
Since Indian authorities in late December began restricting access to Binance and other foreign crypto exchanges operating there without local registration, traders have turned to domestic rivals like WazirX. According to localities, many of them are transferring deposits from Binance.
This is a welcome relief for WazirX and its competitors coindcx and CoinSwitch Kuber, which were hit by the 2022 taxation regime that pushed traders toward offshore exchanges. They appear poised for further gains after Apple Inc.’s App Store this week removed apps from Binance and seven other foreign exchanges following a request from the Indian government.
According to the company, deposit inflows into WazirX increased by nearly 250% in the four days following India’s December 28 compliance show cause notice to nine offshore platforms, compared to the four days before. CEO Sumit Gupta said that CoinDCX reopened for deposits immediately after the event and they started taking deposits immediately.
“The figures that we normally do in three months, we have been able to realize in the last two weeks,” Edul Patel, chief executive of Mudrex, a Y Combinator-backed platform, said of deposit inflows and new users. More than 30,000 customers have registered on Mudrex since December 28, he said.
WazirX and Mudrex estimated that around 70% of their fresh inflows came from Binance, while CoinDCX put the figure at around 40%.
Reiterating a statement it made after the App Store removal, Binance said it is “working hard to inform constructive policy-making that seeks to benefit every user and all market participants.” It did not respond to questions on deposit outflows.
Market share estimates among exchanges serving crypto traders in India are not available. But based on app downloads, Binance has been dominant in the market since a transaction tax introduced in mid-2022 has ruined the economics of consistent trading on local platforms. CoinDCX’s Gupta estimated that the levy caused about 95% of Indian trade to move to offshore locations that did not collect it.
The Indian government moved against offshore exchanges after months of lobbying by local competitors, who argued that new taxes due to be unveiled in 2022 created an unfair playing field. A late December notice from India’s financial intelligence unit said nine exchanges were operating illegally in India without complying with anti-money laundering provisions introduced last year, inviting them to explain why That’s how they are complying.
The FIU also asked the Information Ministry to block the websites of the nine platforms locally. Their URLs were not working in India on Friday evening. Their apps are still available on Google Play in India.
The picture becomes more nuanced when it comes to trading volumes, which have been almost wiped out by the tax cuts at source that came into effect in 2022.
WazirX said there hasn’t been much increase in volume, while CoinDCX said the modest increase seen over the past two weeks may be more due to the overall bullish crypto sentiment. However, CoinSwitch said trading volumes on its platform rose 30-35% in the week following the FIU notice to offshore rivals. Like CoinDCX, CoinSwitch reopened for deposits after the FIU action.
China tension
New Delhi-based think tank Esya Center had in late October written to the Home Ministry seeking a ban on offshore crypto exchanges that do not comply with anti-money laundering rules. According to a copy of the letter seen by Bloomberg, it noted that seven of those platforms have Chinese origins or founders. Esya Center declined to comment.
Since Indian authorities in late December began restricting access to Binance and other foreign crypto exchanges operating there without local registration, traders have turned to domestic rivals like WazirX. According to localities, many of them are transferring deposits from Binance.
This is a welcome relief for WazirX and its competitors coindcx and CoinSwitch Kuber, which were hit by the 2022 taxation regime that pushed traders toward offshore exchanges. They appear poised for further gains after Apple Inc.’s App Store this week removed apps from Binance and seven other foreign exchanges following a request from the Indian government.
According to the company, deposit inflows into WazirX increased by nearly 250% in the four days following India’s December 28 compliance show cause notice to nine offshore platforms, compared to the four days before. CEO Sumit Gupta said that CoinDCX reopened for deposits immediately after the event and they started taking deposits immediately.
“The figures that we normally do in three months, we have been able to realize in the last two weeks,” Edul Patel, chief executive of Mudrex, a Y Combinator-backed platform, said of deposit inflows and new users. More than 30,000 customers have registered on Mudrex since December 28, he said.
WazirX and Mudrex estimated that around 70% of their fresh inflows came from Binance, while CoinDCX put the figure at around 40%.
Reiterating a statement it made after the App Store removal, Binance said it is “working hard to inform constructive policy-making that seeks to benefit every user and all market participants.” It did not respond to questions on deposit outflows.
Market share estimates among exchanges serving crypto traders in India are not available. But based on app downloads, Binance has been dominant in the market since a transaction tax introduced in mid-2022 has ruined the economics of consistent trading on local platforms. CoinDCX’s Gupta estimated that the levy caused about 95% of Indian trade to move to offshore locations that did not collect it.
The Indian government moved against offshore exchanges after months of lobbying by local competitors, who argued that new taxes due to be unveiled in 2022 created an unfair playing field. A late December notice from India’s financial intelligence unit said nine exchanges were operating illegally in India without complying with anti-money laundering provisions introduced last year, inviting them to explain why That’s how they are complying.
The FIU also asked the Information Ministry to block the websites of the nine platforms locally. Their URLs were not working in India on Friday evening. Their apps are still available on Google Play in India.
The picture becomes more nuanced when it comes to trading volumes, which have been almost wiped out by the tax cuts at source that came into effect in 2022.
WazirX said there hasn’t been much increase in volume, while CoinDCX said the modest increase seen over the past two weeks may be more due to the overall bullish crypto sentiment. However, CoinSwitch said trading volumes on its platform rose 30-35% in the week following the FIU notice to offshore rivals. Like CoinDCX, CoinSwitch reopened for deposits after the FIU action.
China tension
New Delhi-based think tank Esya Center had in late October written to the Home Ministry seeking a ban on offshore crypto exchanges that do not comply with anti-money laundering rules. According to a copy of the letter seen by Bloomberg, it noted that seven of those platforms have Chinese origins or founders. Esya Center declined to comment.
