Coinbase Secures Approval to Re-Enter Indian Market Amid Regulatory Changes
Date: March 11, 2023
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In a significant development for the cryptocurrency landscape in India, US-based cryptocurrency exchange Coinbase announced today that it has received the green light from the country’s Financial Intelligence Unit (FIU) to resume operations in the Indian crypto trading market. The company revealed its intentions to roll out initial retail services later this year, with plans for further investments and product offerings following shortly thereafter.
This marks a notable comeback for Coinbase, which had previously halted its Indian operations over regulatory challenges stemming from its use of the Unified Payments Interface (UPI) system. The suspension came more than a year ago, reflecting the complexities surrounding the evolving regulatory environment for digital assets in India.
Regulatory Landscape Changes
In a pivotal shift throughout 2023, the Indian government classified virtual digital assets (VDAs), including cryptocurrencies, under the Prevention of Money Laundering Act (PMLA) of 2002. This new classification mandates that both offshore and onshore VDA service providers, including crypto exchanges, adhere to the PMLA’s requirements, which includes registering as reporting entities with FIU-IND. As a central government agency operating under the Union Ministry of Finance, FIU-IND is responsible for managing information on suspicious financial transactions and coordinating with law enforcement as well as foreign financial intelligence units.
Coinbase’s re-entry into the Indian market comes at a time when other foreign exchanges are also returning. For instance, Binance, another prominent player in the crypto space, successfully registered with FIU-IND in August 2022 after a regulatory pause lasting seven months.
Filling the Gap in the Market
Coinbase’s re-establishing presence in India is particularly timely following the challenges faced by local exchange WazirX, which experienced a significant security breach resulting in a loss of nearly half of its reserves last year. This situation left a void in the market that Coinbase aims to fill. Additionally, Coinbase’s support of other prominent Indian exchanges such as CoinSwitch and CoinDCX positions the company favorably within the evolving crypto ecosystem.
John O’Loghlen, regional managing director for APAC at Coinbase, expressed optimism regarding India’s potential. "India represents one of the most exciting market opportunities in the world today, and we’re proud to deepen our investment here in full compliance with local regulations. We’re committed to building in markets that believe in the potential of crypto and on-chain innovation," he stated.
Expanding the Developer Ecosystem
In a bid to bolster its footprint in India, Coinbase is also focused on expanding its crypto developer platform. O’Loghlen mentioned that by enhancing access to the Coinbase platform and tools such as Base, the company aims to support a new generation of developers in India, inspiring them to innovate locally while scaling their solutions globally.
Historically, Coinbase launched its trading services in India in 2022 with UPI support but was forced to suspend these services shortly thereafter when the National Payments Corporation of India (NPCI) denied knowledge of any crypto exchange utilizing the UPI system. Following this development, Coinbase CEO Brian Armstrong spoke about the informal pressure the company faced from the Reserve Bank of India, which prompted the decision to halt trading.
Cryptocurrency Regulations in India
The backdrop against which Coinbase is re-entering the Indian market is a complicated regulatory landscape. While definitive laws to legalize cryptocurrencies are yet to be established, the Union government has implemented a 30 percent tax on crypto income and a one percent deduction on crypto transactions since 2022. Furthermore, the government shows a positive stance towards blockchain development and central bank digital currencies (CBDCs), such as the Reserve Bank of India’s e-rupee, even as mainstream cryptocurrencies encounter regulatory hurdles.
As Coinbase embarks on this new chapter in India, industry observers will be keenly watching how the company navigates the ongoing regulatory landscape and the opportunities that lie ahead in this burgeoning market.
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