Una Galani, Reuters Breakingviews
November 2, 2021
It’s easier and faster to buy bitcoin, ethereum and dogecoin in India than it is to order a pizza on food-delivery app Zomato (ZOMT.NS). That’s how startups are luring the country’s next generation of investors.
Take CoinSwitch Kuber, an exchange aggregator valued read more last month at $2 billion in a funding round led by Andreessen Horowitz, Sequoia, and Coinbase (COIN.O), a $67 billion U.S.-listed cryptocurrency exchange. The app is a rising star among India’s Gen Z: The average user is just 25 years old, more than a decade younger than its crypto trading peers in the United States. What’s more, over 70% of its customers are investing in financial assets for the first time.
CoinSwitch asks users to upload basic identity details, share their tax number, and take a selfie, a process that takes five minutes, before allowing them to buy and sell over 80 different cryptocurrencies in trades as small as 100 rupees, about $1.30. The app has amassed 12 million users in about 18 months. Alongside rivals, CoinDCX, Bitbns and Binance-acquired WazirX, it’s spending top dollar on advertising during major cricket tournaments.
It spotlights the latest battleground for fintech users. The startups are joining a race against digital lenders and investment platforms including the Ant-backed Paytm, which is seeking an up to $18.5 billion valuation in its initial public offering.
But while the challengers are smaller, the volatility of cryptocurrencies makes trading them addictive. Users open their apps to check on portfolio gains and losses more frequently than, say, a mutual fund investor. It’s a powerful hook for CoinSwitch and others to eventually offer other regulated products like stocks and funds – potentially becoming the next big financial super-app.
Unlike China, which effectively banned the industry, India is more likely to regulate it rather than risk driving digital asset enthusiasts underground. An official attempt to squash cryptocurrencies was overturned in the top court in March 2020. There’s still a chance that the trade may be outlawed, but the bigger immediate problem is perhaps a more simple one. The startups have put little effort in educating their users, so most don’t understand the high-risk, high-return characteristics of what they are dealing in. That leaves plenty of room in India for some kind of big blowup and backlash.
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