“So a few days after launching, we ended up disabling UPI (Unified Payments Interface) because of an informal pressure from the Reserve Bank of India (RBI), which is kind of the treasury equivalent there,” Coinbase CEO & Co-founder Brian Armstrong said in an earnings call for the first quarter of 2022.
Armstrong informed Coinbase’s shareholders that the Supreme Court of India’s ruling restricts the government from banning crypto but “there are elements in the government, including the RBI, who don’t seem to be as positive on it”. He also expressed concern that the government’s measures may be violating the Supreme Court’s ruling but stopped short of revealing Coinbase’s plan of action in India.
“It’s been called a shadow ban in the press. They’re applying soft pressure behind the scenes to try to disable some of these payments which might be going through UPI,” Armstrong said categorically.
Coinbase, which is one of the most popular crypto exchanges in the world, had rolled out its services with UPI payments in India in April 2022 only to disable it three days after a statement from the National Payments Corporation of India (NPCI) that it was not aware of any crypto exchange using UPI payments. Coinbase had been testing UPI payments in India several weeks before the NPCI statement, TechCrunch said in its report.
Armstrong’s candid comments highlight the scale of regulatory uncertainty facing the crypto industry in India at large. It remains to be seen whether his comments might put the company in hot waters with regulatory authorities as it seeks to launch again.
India remains on Coinbase’s radar
The uncertainty with regard to the payments mechanism has not deterred Coinbase’s India plans. Armstrong said that the company prefers to work with the government instead of taking the legal route.
“There (are) a number of paths that we have to relaunch with other payment methods (in India). My hope is that we will be back in India in relatively short order, along with a number of other countries where we’re pursuing international expansion,” Armstrong explained.
1/ There is some noise about a disclosure we made in our 10Q today about how we hold crypto assets. Tl;dr: Your funds are safe at Coinbase, just as they’ve always been.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
Armstrong predicted that most democracies are going to regulate and legalise crypto eventually but it’s going to take time for countries to get comfortable. “That’s why we’re going to launch, even if we’re not exactly sure how the reaction is going to be received; it forces the discussions to be had,” he said during the earnings call.
India’s regulatory uncertainty vis-à-vis crypto
Major crypto exchanges in India have announced that they witnessed a dip in trading volumes following the implementation of a 30 percent tax rate on April 1. Finance Minister Nirmala Sitharaman announced the tax rate in the Union government’s budget for the financial year 2022-23.
Sitharaman also announced a one percent tax deducted at source (TDS) for all transactions. It did not go down well with the industry which called it “chaotic” and prohibitive. The industry has been lobbying with the government to bring the rate down in the range of 0.01-0.05 percent before it comes into effect on July 1.
There are also source-based reports that the GST council is looking to impose a 28 percent tax, same as casinos and betting, which crypto stakeholders term as moving for a ban without announcing it explicitly. The government seems to be in no mood to budge from its position as is evident from multiple statements given out by the RBI and the government officials.
Coinbase’s financial metrics
The general market downturn in the crypto space has affected the bottom line of Coinbase’s revenue as it registered a loss of $430 million compared to a profit of $771 million in Q1 2021.
Coinbase earned a total of $1.2 billion dollars in revenue compared to nearly $2.5 billion in Q4 2021. The company saw an uptick of 9.2 million in Monthly Transacting Users (MTU) against 6.1 million in Q1 2021. However, the company had 11.4 million users in Q4 2021.
The company said that the decline was “driven by lower crypto asset price volatility and lower crypto asset prices overall”. Coinbase, in its letter to shareholders, added that it is looking to keep its adjusted EBITDA losses to $500 million for the year.
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