Indian homegrown cryptocurrency exchanges are recovering from the shock that the imposition of a controversial tax on crypto earnings dealt them with but sentiment is looking up now due to Bitcoin halving and US presidential elections around the corner.

As we enter the second half of 2024 — a crucial year for Crypto — Invezz spoke to Rajagopal Menon, vice-president at WazirX, a major Indian crypto exchange and trading platform, and discussed the company’s prospects going forward, re-entry of Binance, budget expectations and more. Edited excerpts:

Invezz: 2024 was a year of landmark events in the crypto space with the SEC approving the Bitcoin ETF and the bitcoin halving taking place. What did the first half of the year look like for WazirX?

In 2021-22, we closed at $43 billion worth of transactions- that was the previous bull market when Bitcoin had touched $67,000 and then FX happened and everything crashed.

That very year we had the TDS that was introduced by the government plus 30% taxation without setoffs. That crashed sentiment completely. From $43 billion last year my turnover was $4 billion which was a 90% fall. This year we were hoping it would be better because the halving is there.

The sentiment has improved but a lot of my volumes have gone to foreign exchanges. The government did too little too late by shadow banning some of them by taking them off app stores. But if you already had an app on the phone, taking it off the app store didn’t make a difference to your life as one could still trade.

The volumes have not come back to their previous levels. The big ones would survive somehow. The other two (exchanges) are funded and they call themselves unicorn and they’ve raised a lot of money- $100 million dollars and thereabouts. They can survive if they manage the monies effectively.

Unfortunately the bootstrapped startups are bearing the brunt of it which is why you saw an exodus of programmers and entrepreneurs to Singapore and Dubai. Things have started improving now.

Invezz: What is your outlook for the company and the market for the second half and where do you think Bitcoin will end the year?

I think we will sign off on a high because elections are there. Democrats have to prove that they are pro-crypto which is why you have the Bitcoin ETF happening.

Trump and others are also talking about it and you can’t let Trump walk away with the elections. And it’s a very strong lobby.

New regulations likely soon?

There are around 20-25% people who actually own crypto there. We will definitely see another all time high. And the crypto markets are a function of the Bitcoin prices.

When Bitcoin prices rise, sentiment improves. So when sentiments will improve transactions will improve , volumes will improve and more importantly you will have regulations come in. Because we are a signatory to the G20 declaration. The report was asked by us.

It was tailor made for India and it is a Delhi Declaration. And all of us are treaty bound to implement it by 2025. That leaves another 5-6 months .

So once the budget is out, you will have some serious talking happening in the finance ministry about regulations and early next year you will have some regulations happening.

Invezz: Binance and KuCoin are expected to make a re-entry in the Indian market after paying their fines. Will it be a challenge for you?

I would be lying if I said no. There are both pros and cons. One is that if they’re coming back they will have to play on a level playing field. That’s all that we were asking for.

We were saying that if you’re asking exchanges to build TDS collecting mechanisms , if you’re asking me to make sure extensive KYC and compliance checks are done, the same rules should apply to foreign exchanges.

So if they’re playing by the same rules that we were playing by we had no problem because we had proved that we can compete with the best. But this non-level playing field is what negatively impacts exchanges.

You also have to remember that on Binance, KuCoin etc., you can’t buy using INR. You have to buy using USDT.

For an ordinary buyer, that’s one step too many. In WazirX you can buy it under 30 secs; in Binance it is more likely to take you 10 minutes because you have to first find the right buyer, make sure you are not scammed and the biggest danger now is that your account could get frozen if you use foreign exchanges.

And then get to your USDT and buy your Bitcoin with that. It’s a long winding process but the advantage they had till now that they didn’t have the 1% TDS but if they’re playing by the rules, that will be there. Compliance costs are a big bane.

But, they do have a lot more tokens. WazirX will have 300 tokens and Binance will have 3000. That’s an advantage they have but for first time users WazirX and Indian exchanges are the way to go.

Taxation on crypto in India a big issue

Invezz: The taxation on crypto earnings and TDS brought a blip to the sentiment. With the budget coming up, you see any modifications happening?

We are talking to the government and the government wants to know what is happening. There were two things that the government did – one was the TDS and the idea behind TDS was to track crypto transactions.

You don’t need a 1% TDS. You need a 0.01% TDS if you want to track transactions. Secondly, with the 30% tax, if you’re making losses on crypto you are not allowed to set off on them.

If I have a Rs 100 profit in the stock market and a Rs 100 loss, I don’t have to pay tax on it. But if I have a Rs 100 profit in crypto and a Rs 100 loss, I have to pay tax on the profit. And I cannot carry forward the losses which is allowed in stock markets.

There are a lot of issues. Hopefully, something will come up because all said and done this is a very practical government.

You are seeing your TDS collections have fallen and your GST collections which are the brokerage charges on all exchanges have collapsed. You are not making any money on TDS. All the money is going abroad. You say Make in India and Buy in India but you’re punishing Indian exchanges.

It’s a classic case of good intentions and unintended consequences. Maybe something will happen but last two years have taught me not to be very optimistic about it

Invezz: Does WazirX have a global ambition ?

WazirX was founded because in 2016, Nischal Shetty wanted to buy a Bitcoin but it took him three whole weeks to get his hands on it. That is when he said that there was a need for Bitcoin and people are ready to buy it which is how WazirX was born.

We started our operations in 2018 and within two months we had the RBI notification that forbade banks to work with crypto exchanges.

So what happened is that we developed this unique P2P platform and we were the first company in India to do it. We were clear that the idea was to make crypto accessible to every Indian.

Crypto penetration still very low

Penetration in India is very low. How many users are there ? 50 million max across 4 or 5 major exchanges. And there are 140 million people. It’s not going to happen overnight but we will be there for the long haul.

We are looking at India very closely. At this point of time we are not looking at overseas because in India only the market is so big.

But we’re looking at a lot of products- before this regulatory clampdown we had a decentralised exchange ready, we had a NFT marketplace ready but all of this we had to roll back because of regulatory uncertainties.

There is so much you can do in the crypto space- you can do staking, you can do options and futures. These markets are on 24×7. When India is the promised land and we are naturally one of the leaders here, currently we are only looking at India but never say never.

Invezz: What’s your focus area within the business model currently between increasing the user base and getting more tokens?

We have a lot of organic people coming on WazirX anyway. You want to buy crypto, we are the first port of call. If you want to buy a relatively unknown coin you might not get it on WazirX. Bitcoin remains the most preferred and if you want to buy that you come to WazirX.

On Memecoins

But if you hear of some token like there was this token called Joe Boden around US presidential election and a Trump token which were memecoins. We don’t want to list coins we don’t know anything about the pedigree of. We only list tokens which have a strong team backing it and there is enough liquidity.

And we also look at other exchanges who have also listed it that means they have done the due diligence.

So there is this organic push and pull. You have a lot of people who come in and to make them happy you need to have a certain amount of tokens which we think are not scammed coins. We have about 5-6 tokens listing every month.

But looking globally in the month of May there were about 544,000 memecoins which were launched on Solana and most of them are questionable.

Therefore, you have to be very careful because at the end of the day people are trusting you with their money. We are not in a hurry to list a lot of tokens but we make sure we list the right ones

Invezz: Do you see mainstreaming of crypto happening in India in the last few years?

Absolutely. We have 140 crore people in India and 13 million DEMAT accounts which is just 10%. It’s only after 2014 that 50% of people in India got a bank account.

Penetration of finance products is just starting in India which is why everyone is so excited about it because we are just scratching the surface.

From bank accounts you move to insurance products and then you move to investment products- that is the typical cycle and crypto is on top of that. But you have a lot of these young rich pockets. They are more comfortable in mutual funds and stocks.

None of them watch TV. They are on Instagram and Twitter and what do they watch on Instagram? They see Elon Musk and what is he talking about ? Dogecoins. The internet natives are more comfortable with crypto. And they are more risk friendly as they already have the safety net.

For them, it’s about how to get rich, quick. They see the return that Bitcoin is giving. In the last 15 years it has given over 100% return compounded. No asset in the history of mankind has given that kind of return. They see this and hear this and find it good. So I’m not selling a life insurance product.

Women in crypto

Consumers come naturally to me. I just have to be efficient, provide a deep liquid market and the right tokens and people come naturally to me when the markets are there.

When the markets are hot everybody comes. We did a survey where 20% of our users were women which is pretty high.

Mostly men take all the financial decisions but we’re seeing a larger proportion of women in crypto and that’s what crypto is supposed to do right – make you financially independent.

We are also seeing nice signals from the hinterland- in places like Raebarelly and other small places, people are investing. I am not saying there is a line of people but there are people who are talking about it. It’s native to the internet. As long as the internet is there crypto will be there.

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