Coinbase Eyes Re-Entry Into India After Regulatory Roadblocks

Coinbase is actively working on re-establishing its presence in India, more than a year after halting operations in the country. The U.S.-based cryptocurrency exchange is currently in discussions with Indian regulatory bodies, including the Financial Intelligence Unit (FIU), as it seeks approval to resume services, according to sources familiar with the matter. Since these talks are ongoing, details remain confidential.

Coinbase’s renewed push into India follows a history of challenges in the market. In contrast, Binance, the world’s largest crypto exchange, successfully restarted its Indian operations in August 2023 after registering with the FIU. Binance’s return set a precedent for global crypto platforms looking to comply with Indian regulations.

Coinbase’s Previous Attempt in India

Coinbase first entered the Indian market in April 2022, launching with support for the Unified Payments Interface (UPI), India’s most popular digital payment system. However, within three days, the company was forced to suspend UPI transactions after the National Payments Corporation of India (NPCI), which oversees UPI, publicly stated that it did not recognize Coinbase’s operations.

Following the abrupt halt, Coinbase CEO Brian Armstrong later revealed that the company had faced “informal pressure” from the Reserve Bank of India (RBI), which indirectly forced them to withdraw. While cryptocurrency trading is not explicitly illegal in India, most banks remain reluctant to provide financial services to crypto-related businesses, largely to avoid potential regulatory conflicts with the RBI. Many Indian entrepreneurs and investors have observed that banks fear repercussions from the central bank if they support crypto firms.

Regulatory Compliance and Market Re-Entry

Coinbase’s potential comeback hinges on securing an FIU license and meeting India’s compliance requirements. The FIU had previously deemed several foreign exchanges, including Binance and Kraken, as “illegally” operating in the country without registration. Since then, many of these firms have adjusted their operations to align with FIU’s requirements, which mandate stricter disclosures on user activities and financial transactions.

A Coinbase spokesperson, in a statement to TechCrunch, said the company remains optimistic about opportunities in India and is committed to adhering to regulatory guidelines. However, the spokesperson did not disclose any updates regarding the FIU registration process.

Also Read: Czech Republic Eliminates Capital Gains Tax on Long-Term Bitcoin Holdings

Coinbase’s renewed interest in India aligns with its broader global expansion strategy. At a recent Goldman Sachs conference, Coinbase CFO Alesia Haas emphasized the exchange’s focus on international growth. Additionally, Paul Grewal, Coinbase’s Chief Legal Officer, recently joined the board of directors at the U.S.-India Business Council (USIBC), a division of the U.S. Chamber of Commerce.

“I’m honored to join the USIBC Board to help strengthen the bridge between India and the U.S. in shaping the future of finance,” Grewal said in a statement shared by USIBC. He also highlighted India’s rapid growth in the Web3 space, pointing out that the country’s share of global Web3 developers has quadrupled since 2018 to reach 12%—the highest growth rate among emerging markets.

Challenges in the Indian Crypto Market

Although India is a major market for global tech companies, its crypto industry faces regulatory hurdles. A major obstacle has been India’s stringent tax policies, introduced in 2022, which include a 30% tax on crypto gains and a 1% tax deducted at source (TDS) on every crypto transaction. These regulations have significantly reduced trading volumes, discouraging many investors from participating in the market.

Coinbase’s re-entry could also help fill the void left by WazirX, an Indian exchange that suffered a major security breach, losing nearly half of its reserves. Currently, CoinDCX and CoinSwitch dominate India’s crypto market, both of which have received investment from Coinbase Ventures.

While Coinbase remains eager to return, the timeline for its relaunch will depend on how quickly it can navigate India’s regulatory framework. The exchange’s ability to secure approvals and comply with local laws will determine whether it can successfully regain a foothold in one of the world’s largest and most complex crypto markets.

(Original report by TechCrunch: Coinbase Eyes Re-Entry Into India.)