India’s Digital Surge

I must start this post by saying that this investment is special for me because not only is CoinDCX Jump Capital’s first investment in India, but also because it is closely tied to unveiling a new chapter for the Indian financial and technology ecosystem.

With ~640mm internet subscribers, second only to China, India is one of the largest and fastest growing markets for digital consumers. McKinsey’s analysis of 17 mature and emerging economies finds that India is digitizing faster than any other country except Indonesia and has significant growth ahead given that internet penetration in India is just 40%. Suffice to stay, India’s digital journey is well under way.

But when it comes to digital asset adoption, India has been behind the curve vis-à-vis its regional counterparts like China as well as the rest of the world. We believe that the Indian digital asset ecosystem is poised to gain considerable global market share in the near future.

Key Drivers for Adoption

The time is right for India to start positioning itself as the next innovation hub for digital asset and blockchain development. We believe that some of the factors that will drive this adoption are:

• Continued rise of India’s market share of international remittances: India is the world’s largest population outflow country, with more than 17 million immigrants in 2019 and hence also the top recipient of remittances worth ~$80bn+ annually. Remittance fees in India in 2019 were as high as ~$6 bn. Harnessing the power of maturing stable coins or other digital assets as the new global money movement rail can save the world’s biggest recipient of money transfers billions of dollars annually.
• Rupee instability: Indian rupee has been highly volatile recently and is trading near an all-time low vs. the US Dollar. Inflation has been consistently hovering around the higher end of the Reserve Bank of India (“RBI”)’s target range while fiscal deficit is set to widen this year to almost 5% of the GDP. Fiat onramp / offramp through CoinDCX gives Indian consumers an option to allocate some of their reserves to emerging credible stable coins.
• Regulatory Maturity: Even though significant regulatory uncertainty still persists for the Indian crypto ecosystem and we fully expect some ups and downs during the journey; we believe that both government and RBI are now investing earnest efforts to understand the merits of this technology and finding appropriate ways to regulate vs. outright ban. This is evidenced by various initiatives such as:
  • The Internet and Mobile Association of India (IAMAI) is believed to be working on a code of conduct for cryptocurrencies, with regulatory pointers for KYC guidelines and anti-money laundering protocols.
  • NITI Aayog – leading policy think tank working for the government of India, has come out with a strategy document recognizing many crucial areas blockchain technologies can significantly benefit the country.
  • The National Payments Corporation of India (NPCI) has designed and adopted a blockchain-based system for automating payment clearing and settlement processes of NPCI products

• Financial Inclusion: India is home to nearly 190 million unbanked individuals. Crypto and DeFi (“Decentralized Finance”) startups can provide low-cost alternatives for lending, obtaining credit and borrowing money.

Some of the other factors are a growing blockchain developer community given India’s strong technology roots, growing trading community and sizeable young population comfortable with new modes of payments and transactions.

Finding the Perfect Team

As identified in our recent crypto thesis work, we believe that Fiat Onramps are one of the most exciting investment opportunities, especially in emerging countries like India for many of the reasons cited above. As we were scouting for the right team to partner within India, we were immediately impressed by what Sumit and Neeraj had built at CoinDCX.

After launching not too long ago in 2018 and despite the regulatory hurdles, they have positioned CoinDCX as the largest and leading crypto exchange and brokerage firm in India. We were further impressed by their speed and breadth of products they have launched for their customer base – Fiat Onramp (INSTA), Spot, Margin & Derivatives Trading, Lending and Staking. Given that we have a global view of the crypto exchange landscape through our affiliation with Jump Trading (one of the world’s leading crypto trader and market maker), this level of progress in a short span is no small feat.

Having built consumer businesses before, the CoinDCX team understands the Indian retail investor. Since there is just 0.4% crypto penetration amongst Indian Internet subscriber base, Sumit and Neeraj are determined to educate and onboard the long tail on the crypto bandwagon. Their recent initiative DCXLearn - a blockchain and cryptocurrency education - platform aims to lay the groundwork for mass crypto adoption and arm users with the knowledge necessary to navigate crypto markets.

Great Partners and the Road Ahead

CoinDCX team has also done a phenomenal job aligning themselves with relevant investors and partners from crypto community including Polychain Capital, block.one, Bain Capital, Coinbase Ventures and BitMEX. We are super excited about the prospects of India becoming a global digital asset innovation hub and we look forward to collaborating with the above-mentioned group and helping CoinDCX become the dominant crypto finance platform in India.