The world’s largest cryptocurrency exchange, Binance, has faced a major setback in India as the government has restricted access to its platform and other foreign crypto exchanges operating without local registrations. As a result, many Indian traders have moved their deposits to domestic rivals like WazirX, CoinDCX, and CoinSwitch Kuber, which have seen a surge in inflows and new users.
Government action
The Indian authorities issued a compliance show-cause notice to nine offshore crypto platforms on December 28, 2023, asking them to explain why they should not be blocked for violating the Foreign Exchange Management Act (FEMA) and the Prevention of Money Laundering Act (PMLA). The notice also warned the platforms of legal action if they failed to comply.
Following the notice, Apple Inc.’s App Store removed the apps of Binance and seven other foreign exchanges from its Indian store after a request from the government. This further hampered the access of Indian traders to these platforms and boosted the demand for local alternatives.
Domestic response
According to WazirX, its deposit inflows jumped about 250% in the four days following the government notice, compared with the four days leading up to it. The company also estimated that roughly 70% of its fresh inflows came from Binance.
CoinDCX, which became India’s first crypto unicorn in 2023, also reported an increase in deposits and new users after the notice. The company said that about 40% of its new inflows came from Binance.
CoinSwitch Kuber, another domestic crypto platform that raised $260 million in 2023 at a valuation of $1.9 billion, also witnessed a spike in demand from Indian traders looking for alternatives to Binance and other foreign exchanges.
Mudrex, a Y Combinator-backed platform that offers automated trading strategies for crypto investors, said that it realized the figures it usually does in three months in the past two weeks. The company added that more than 30,000 customers have registered on its platform since December 28.
Binance’s stance
Binance, which acrimoniously split with its Indian affiliate WazirX in 2022, said that it is “working hard to inform constructive policy-making that seeks to benefit every user and all market participants,” repeating a statement it made after the App Store removal. The company also said that it is committed to complying with local regulations and supporting the growth of the Indian crypto ecosystem.