Numerous crypto-focused venture capital firms have rushed to India over the past two years in hopes of transforming the vast developer community of the world’s second largest internet market into a major web3 powerhouse. But what does Changpeng “CZ” Zhao, arguably the most powerful and influential figure in the crypto industry, think of India’s potential? Not much as of today.
“To be honest, I don’t think India is a very crypto-friendly environment,” Zhao said at the TechCrunch Crypto conference on Thursday. Zhao is not alone in having such a bleak view of the Indian market. Dozens of investors and startup entrepreneurs I’ve spoken to have privately shared similar concerns, but Zhao’s comment is notable because no one else of such stature has expressed such a view publicly.
Zhao blamed the country’s high tax environment for the market not being as profitable for global players. “If you tax 1% on every transaction, there won’t be as many transactions,” he said. Certainly Binance, by far the largest crypto exchange in the world by volume, is operational for users in India.
“A user could trade 50 times a day and he would lose about 70% of his money. There will be no volume for an order book exchange. So we don’t see any profitable business in India today. We just have to wait. We’re talking to a number of industry bodies and influencers and trying to find some logic there,” he said, adding that charging a high tax on every transaction generally results in less tax accumulation.
“We’re trying to get that message across, but it usually takes a long time for tax policies to change,” Zhao warned. “Binance is going to countries where the regulations are crypto and business friendly. We don’t go to countries where we don’t have a sustainable business – or any business, whether we go or not.”
Zhao dismissed any concerns that the company sees less potential in India due to difficult deal deliberations with local exchange WazirX.
India pushed through a virtual currency taxation law earlier this year. It taxes income from the transfer of virtual assets at 30%. In order to capture details of all these crypto transactions, New Delhi takes a 1% tax deduction at source on payments made in connection with the purchase of virtual assets.
The nation’s move has brutally wiped out transactions from local exchanges CoinSwitch Kuber, backed by Sequoia India and Andreessen Horowitz, and CoinDCX, backed by Pantera, alongside the market downturn observed on their platforms.
WazirX processed approximately $500 million in volume per day during the peak of the crypto bull cycle last year. According to one person with direct knowledge of the matter, the number had fallen below $5 million a month ago.
Other global exchanges have tried to make a foray into India. Coinbase, which has supported both CoinDCX and CoinSwitch Kuber, launched its crypto platform in the country earlier this year but quickly rolled back the service due to regulatory concerns.
Brian Armstrong, Coinbase co-founder and chief executive officer, said in May that the company is removing Coinbase’s support for local payments infra UPI “due to informal pressure from the [central bank] Reserve Bank of India.”