The Impact of Government Crackdown on Binance in India
The acrimonious split between Binance and its Indian affiliate, WazirX, in 2022 seemed to leave Binance as the dominant cryptocurrency exchange in the local market. However, a recent government crackdown on offshore platforms has shifted the competitive dynamics. Indian authorities started restricting access to Binance and other foreign exchanges without local registrations, leading traders to flock to domestic rivals like WazirX. Deposit inflows at WazirX increased by about 250% in the four days following the compliance notice, according to the company. Competitors like CoinDCX and CoinSwitch Kuber also experienced significant gains.
App Store Removes Binance and Other Foreign Exchanges
Apple’s App Store recently removed the apps of Binance and seven other foreign exchanges following a request from the Indian government. This move further strengthens the position of domestic exchanges like WazirX, CoinDCX, and CoinSwitch Kuber. WazirX reported a surge in deposit inflows after the compliance notice was issued, while CoinDCX reopened for deposits immediately after the event. The figures for new users and deposit inflows have been impressive, with Mudrex reporting that they achieved what they usually do in three months within two weeks.
Binance’s Response and Market Share Estimates
Binance stated that it is working towards constructive policy-making but did not address questions regarding deposit outflows. Estimates for market share among crypto exchanges in India are not available, but Binance has been dominant based on app downloads since the introduction of a transaction tax that drove trading to offshore venues. The Financial Intelligence Unit (FIU) has requested the information ministry to block offshore platforms’ websites locally, and their URLs are currently not accessible in India.
Trading Volumes and China Tensions
The introduction of the Tax Deducted at Source significantly impacted trading volumes in India. While WazirX reported minimal changes in volumes, CoinDCX and CoinSwitch observed slight upticks, potentially due to overall bullish crypto sentiment. Esya Centre, a New Delhi-based think tank, has urged restrictions on offshore exchanges that do not comply with anti-money laundering regulations. The fact that many of these platforms have Chinese origins or founders may have influenced India’s scrutiny, given the ongoing tensions between the two countries.
Hot Take: Indian Government Crackdown Shifts Crypto Exchange Dynamics
The recent government crackdown on offshore cryptocurrency exchanges in India has had a significant impact on the competitive landscape. With Binance facing restrictions and its apps being removed from the App Store, domestic exchanges like WazirX, CoinDCX, and CoinSwitch Kuber have seen a surge in deposit inflows. This shift highlights the importance of regulatory compliance and local registrations for crypto exchanges operating in India. It also reflects India’s ongoing scrutiny of incoming Chinese investments and the operation of Chinese companies within the country. As the market continues to evolve, it will be interesting to see how these developments shape the future of cryptocurrency trading in India.
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