India gets second crypto unicorn within two months

Indian crypto exchange CoinSwitch Kuber has become the country’s second crypto unicorn after raising US$260 million in a Series C funding round, the startup announced.

Fast facts

• The latest funding round drew in marquee investors — it was led by Coinbase Ventures and Andreessen Horowitz (a16z). Existing investors Sequoia, Paradigm, Ribbit and Tiger Global also participated in the round. Coinbase has also invested in CoinDCX which became India’s first crypto unicorn in August.

• Although CoinSwitch Kuber is the second Indian company to reach unicorn status — the term is used for a privately held startup with a value of over $1 billion — its valuation of US$1.9 billion in the funding round puts it ahead of CoinDCX, which is valued at US$1.1 billion. The current financing round is CoinSwitch Kuber’s third fundraise this year — it raised US$15 million in January and another US$40 million in April in a round that pegged its valuation at US$500 million. The company’s total funding stands at over US$300 million while its valuation has grown nearly 4x in six months.

• Last month, CoinSwitch Kuber had also claimed to be the largest Indian exchange in terms of number of users with over 10 million customers. The startup grew its customer base 10 times in 10 months — it had only 1 million customers in November 2020. Around 7 million of these 10 million users are active with a monthly transaction volume of around US$2 billion, the Economic Times previously reported. Its rivals CoinDCX and WazirX only have over 3.5 million and 7.3 million users respectively.

• For a country with over 1.39 billion people, 10 million or less signifies a tiny fraction of the population. But according to Rahul Gaitonde, an advisor to crypto companies, the fact that the cumulative number of users of Indian crypto exchanges now exceeds the number of taxpayers in the country, around 15 million, is a big deal. “That’s incredible, because that means the number of people, for instance, who pay capital gains tax on their stocks and mutual fund investments, will be a fraction of that [total number of taxpayers in India]. Meaning, the people who invest in crypto and the people who pay tax because of gains from their stocks and mutual fund investments are roughly the same size. That’s a huge deal for crypto to have achieved in just a few years, and it can only grow from here.”

• The startup is planning to use the fresh funds to increase its user base to 50 million, launch new products like lending and staking as well as a product geared toward institutional clients, expand its team and launch a fund for financing innovators in the crypto ecosystem.

• Bearing the name of the Hindu God of wealth Kubera, CoinSwitch Kuber offers pooled liquidity of the leading exchanges in India to ensure competitive rates to its customers. It was founded in 2017 in Bengaluru to increase and simplify access to cryptocurrencies at a time when most Indians were suspicious of crypto, including the government and the central bank, which tried to impose a ban on it in 2018. Although the Reserve Bank of India’s ban order was eventually struck down by the apex court last year, the central bank continues to lobby for a ban as the country’s crypto bill awaits a cabinet nod. According to the latest reports, the bill intends to treat crypto as commodities in the asset class. The government has also set up a panel to examine how crypto income can be taxed. The panel is scheduled to submit its report this month.

• More and more global investors are pouring money into the Indian crypto startups and “it’s definitely a vote of confidence in the Indian crypto ecosystem as a whole,” Gaitonde said. It is also a sign that the Indian crypto landscape is slowly but surely beginning to mature, and Gaitonde expects more Indian crypto unicorns to emerge in the future. While most Indian exchanges including CoinSwitch Kuber generally offer the basic trading facilities, with a few exceptions, Gaitonde believes access to crypto in India will increase as exchanges expand their offerings and “this is what a16z and other investors are betting on.”