Good Evening [%first_name |Dear Reader%],

Welcome to this week’s edition of Tokenised.

After spending a few days in Indore last week, I flew to Bengaluru to attend Coinbase’s India launch. 

In between ever taller claims of furthering financial empowerment and the ‘power of the blockchain’ (and some pretty lame crypto puns), Coinbase announced two key things: it would allow users to buy crypto tokens using UPI—India’s homegrown payments network—and hire 1,000 people in the country by the end of the year. 

Met by applause at the launch, the first announcement has already hit a snag. So, that’s what we’re looking at in this week’s edition.

Let’s jump right in.

A bumpy start to Coinbase’s India journey

Late last week, global crypto exchange Coinbase threw a party-like event at a plush hotel ballroom in Bengaluru. The mood was strikingly celebratory as the dearly beloved and faithful gathered at what seemed to me like a cross between a north-Indian wedding (re:loud) and a cult meeting.

The exchange’s senior executives, including chief executive Brian Armstrong, took the stage and talked a big game about their commitment to India and their desire to operate in the country. Because that was basically what the event was about—Coinbase’s launch in India. 

And at the centre of it all was Coinbase’s new feature: a UPI payment option for buying crypto. 

Now, Coinbase isn’t the only one to have offered this. Many exchanges have done so on and off in the past. But the amount of noise Coinbase was making about it suggested that it had cracked some sort of deal with the regulators. Maybe the National Payments Corporation of India (historically not a fan of crypto) wouldn’t be cross with UPI being used to buy tokens. Tokens that, I might add, the Reserve Bank of India’s (RBI) governor has called “worthless” on multiple occasions. 

But in a press conference afterwards, Coinbase executives remained elusive on how exactly UPI buying would work on their platform. Pressed by a reporter on which banks were facilitating the UPI functionality, Panjak Gupta, vice president of Engineering at Coinbase, said that the firm’s banking partners had asked that Coinbase not disclose their names. Notably, Armstrong made time for a podcast with comedian Tanmay Bhat but chose to sit out the press briefing. (I spotted him wandering the hotel lobby about 20 minutes after the briefing ended.)

Coinbase may have thought its day was going fairly well, but regulators sitting about a 1,000 km away were in quite a different mood. Barely hours after Coinbase’s event ended, the NPCI tweeted that it wasn’t aware of any crypto exchange using UPI to facilitate crypto trading. 

“That was NPCI saying they’re not okay with it. Coinbase probably used a vague, non-crypto name to get the UPI partnership. But also made too much noise,” a senior executive at a rival crypto exchange told me, adding that Coinbase had made the same mistake Indian exchanges did when they went on an advertising blitz. 

Following Coinbase’s run-in with the NPCI on 7 April, Mobikwik—a popular payment wallet among crypto exchanges—also stopped supporting crypto exchanges. The firm’s chief executive Bipin Preet Singh confirmed the development, according to a report by The Economic Times. 

It seems like Coinbase’s chest-thumping may have not just muddied the waters for itself, but for other smaller exchanges too. According to three crypto exchange founders I spoke to, many banking partners have already severed—or are taking steps to sever—UPI functionalities that were previously being offered to crypto exchanges. 

Just yesterday, news outlets reported that CoinSwitch Kuber, a crypto exchange aggregator that has received investment from Coinbase, had temporarily disabled all options to deposit rupees on its platform, including bank transfers. 

It looks to me like Coinbase was laughing, then it sneezed, and now every business in India’s crypto landscape has a cold. 

And this comes just days after a major dip in trading volumes sparked off by the implementation of India’s new 30% tax on crypto income. According to data compiled by crypto research firm Cerbaco, WazirX and CoinDCX—two of India’s largest exchanges—saw volumes dip by 72% and 52% respectively after 1 April, when the tax came into effect.

All in all, Coinbase seems to have chosen an interesting time and method to enter India. Exchanges are already under pressure due to the 30% tax, and their operations will get more complicated after the 1% tax deducted at source (TDS) kicks in from July. On top of it all, Coinbase has now ticked off the NPCI. Just how well they can cajole (or lobby) their way back into the good graces of India’s regulators will determine how their India ambitions pan out. 

With that, let’s turn to some other things that happened in crypto over the last few days. 

Crispy bytes

• Dubai is making strides as a hub for crypto businesses after managing to lure big name exchanges like FTX and Binance to set up shop in the Gulf state. [Financial Times]
  
• Institutional investors like BlackRock and Fidelity—alongside others—have reached an agreement to invest US$400 million in Circle, the firm behind the USDC stablecoin. USDC has a market capitalisation of US$50 billion. [TechCrunch]
  
• Crypto startup Wyre is being acquired by payments firm Bolt for US$1.5 billion. [The Wall Street Journal]
  
• Trading app Robinhood has rolled out its crypto wallet to two million of its customers. [Bloomberg]
  
• Uniswap Labs, the firm behind popular decentralised finance platform Uniswap, has launched its own venture arm to invest in startups. [TechCrunch]

Deeper dives

Venture capital giant Andreessen Horowitz has spent about US$3 billion investing in crypto startups so far. And leading the charge on these investments was Chris Dixon, who led funding rounds in firms like Coinbase, OpenSea, and Yuga Labs. While Dixon is well-known for his belief in ‘web3,’ this interview with The Verge’s Nilay Patel makes for good listening (or reading).

My favourite bit? When Dixon dings large internet firms like Google and Facebook for the power they hold, and then immediately turns around to draw a comparison between how OpenSea is like the Google of non-fungible tokens. [Link]  

What caught my eye this week

Software firm MicroStrategy first placed bitcoin on its balance sheet with a US$250 million investment back in August 2020, and the firm hasn’t looked back since. 

Just last week, MicroStrategy used its bitcoin holdings—now worth about US$6 billion—to take out a loan to buy more… bitcoin. In many ways, the firm’s stock itself has become a proxy for bitcoin’s price movement. So much so that the value of the firm’s bitcoin holdings now exceeds its market capitalisation by about US$1 billion. 

While market regulators in the US haven’t yet allowed a bitcoin-linked exchange traded fund (ETF) to list on the bourses, MicroStrategy seems to have found a nifty strategy to get around the hiccups.  

That’s all for this week’s edition. If you have any overarching thoughts (or even nitpicky ones) about this newsletter, please do write to me at [email protected].

I’ll see you again next week. Take care!

Regards,

Jaspreet Kalra