Coinbase, a US-based cryptocurrency exchange, exited India — the country with the largest number of crypto investors globally — within three days of its launch. Brian Armstrong, the co-founder and chief executive, has now said that they made an exit because of "informal pressure from the government and the Reserve Bank of India".
CNBC-TV18 has reached out to the RBI but is yet to hear back from them.
Coinbase launched its crypto trading service in India on April 7, which allowed its clients in India to buy crypto via UPI (unified payments interface). Coinbase rolled back operations after the National Payments Corporation of India (NPCI), the body that oversees UPI, said it was "not aware of any crypto exchange using UPI."
Speaking on last month's fiasco in the first quarter 2022 earnings call on May 10, Armstrong said the informal pressure from the government and RBI could be in violation of the Supreme Court of India's ruling, which had overturned the central bank's ban on cryptocurrency.
"India is a unique market in the sense that the Supreme Court has ruled that they can't ban crypto, but there are elements in the government there, including at Reserve Bank of India, who don't seem to be as positive on it," Armstrong said.
"And so they in the press, it's been called a shadowban; basically, they're applying soft pressure behind the scenes to try to disable some of these payments, which might be going through UPI," he said.
In 2018, the RBI effectively banned cryptocurrency trade in India. However, a Supreme Court ruling in 2020 set aside the central bank's order.
Despite SC's clean chit, the RBI has continually contested the use of crypto over the years, citing concerns over the country's financial stability. This has created a highly disruptive environment for cryptocurrency exchanges in the country. They periodically face clearance issues with banks that are seemingly inclined to RBI's longstanding view on crypto.
Speaking on plans for a relaunch in the country, the CEO of Coinbase said they are working with RBI and are exploring other payment options.
"I think there are several paths that we have to relaunch with other payment methods there. And, that's the default path going forward," Armstrong said. "My hope is that we will be live back in India in relatively short order, along with some other countries, where we're pursuing international expansion similarly," he added.
Coinbase reported revenue of $1.17 billion for the first quarter of 2022. This was a 35 percent drop from the fourth quarter of the previous calendar. The NASDAQ-listed crypto exchange reported a quarterly net loss of $430 million, compared to a profit of $840 million in the fourth quarter of 2021.
Crypto exchanges have seen a steep decline in trading volumes since the 30 percent tax came into effect in India on April 1, 2022. Another 1 percent TDS is to come into effect from July 1, and the government is also planning to bring cryptocurrency transactions under the GST slab of 28 percent, making such trades akin to gambling and betting.
First Published: IST