Ashish Singhal, co-founder and chief executive of CoinSwitch, said that while low crypto trading volumes in India have made business difficult, the company has made multiple “drastic” cost-cutting moves to reduce its expenses amid what has been a turbulent two years for crypto overall. industry
Now, CoinSwitch is poised to announce an “expansion” into the broader wealth management services as early as next quarter, Singhal said, adding that the company’s offerings “will look to fill strategic gaps that still exist in stock market investment offerings in the industry.”
CoinSwitch’s revenue from operations decreased by 81.7% to ₹45.6 crore in FY23 from ₹248.6 crore in FY22. Its losses reduced to ₹385 crores of ₹513 crore during the same period, according to company filings with the Registrar of Companies (RoC).
The reduced scale of the company is attributable to the challenges faced by the industry. The platform, like the general crypto industry, has seen trading volumes remain well below the peak of 2022. While CoinSwitch was an exchange aggregator, it tried several products such as its own exchange, and even a multi-exchange platform, to bring users to its platform. However, heavy taxation in India has seen gross crypto trading volumes decline by more than 95% since their peaks in early 2022 across all exchanges. CoinSwitch was no exception.
In the Union budget for fiscal year 2022-23, the government imposed a 30% tax on crypto earnings, in addition to a 1% tax deducted at source, encouraging investors to move to foreign platforms.
On 12 December, the company formed an umbrella unit, PeepalCo, to diversify its offerings. Singhal emphasized that while CoinSwitch itself will continue to focus on cryptocurrencies, standalone products will operate independently within the new parent umbrella.
Crypto trading volumes are growing again, but they are not comparable to the growth seen in 2022, Singhal admitted. “Users were able to enter the crypto market and simply trade crypto, which contributed to the growth. But now, volumes are nowhere near the peaks we saw more than two years ago,” he said.
Singhal claimed that with a different tax structure, growth in business volume “may have been 10 times or probably even more.”
PeepalCo’s expansion strategy includes products like stocks, fixed deposits, exchange-traded funds (ETFs) and more. However, Singhal added that the company is not completely diversifying away from cryptocurrencies.
“Cryptocurrency assets can only be about 4-6% of an investor’s portfolio. It’s risky, so obviously, everyone can’t put all the money they have into crypto—and they shouldn’t either. We’re looking at how users can build sustainable wealth over time. Crypto is one part of the equation, but stock market, mutual fund and many other products together could help build this wealth,” Singhal said, explaining the rationale behind his move.
This is where CoinSwitch’s expansion plan will target, Singhal said. “Less than 3% Indians enter the stock market. That is what we will seek to solve. Our product may not be drastically different from what you see in the market, but it would make a difference in terms of decision-making,” he added. However, Singhal clarified that the company will not treat marketing consulting as a segment.
However, such a transition will mean that the company’s dwindling finances could take additional stress.
“It was much easier for us to be profitable at a lower scale. On a larger scale, one must invest in the right things for the future. You can’t take short-term solutions and just be profitable. Our moves will require a lot of investment, but I can’t say at this time if we would be profitable in the next year or so. The ultimate plan is to be self-sustainable.”
“We have reduced the overall cost from its peak in 2021. We have focused on dealing with trading volumes efficiently to reduce costs, but we would still need volumes to peak in crypto to achieve profitability again in this industry. Reducing taxation is the only way forward for that,” Singhal added.
In October 2021, CoinSwitch became a unicorn cryptocurrency startup after a 260 million funding round led by global crypto major Andreessen Horowitz (a16z). A senior industry official close to developments at CoinSwitch, who requested anonymity, said the company has plenty of cash reserves to fuel its diversification plan – despite a huge drop in revenue in FY23.
“The startup has been frugal in its overall operations, more so in FY24. The overall progress has also been wise of Coinswitch, to take the bear market time to diversify rich offerings. They have also managed to reduce losses through various strategic measures—although much of it shows , that running a pure-play crypto business, despite a lot of sudden hyper-optimistic buzz in the industry at the moment, may not be viable in India unless there is an overhaul of taxation and regulatory stance,” the official added.
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Published: 15 Mar 2024, 19:22 IST