Layoffs, Cost-cutting: Indian Crypto Exchanges Prepare for a Prolonged Winter
The government's recent TDS requirements and the lack of access to UPI payments have hurt prospects.
Indian cryptocurrency exchanges are facing a tough situation amid bearish market conditions and new taxation policies. The government's recent Tax Deducted at Source (TDS) requirements and the lack of access to UPI payments have hurt the earnings and prospects of several crypto companies.
Many crypto exchanges in India have been forced to put their expansion plans on hold and implement measures to stay afloat and prepare for a prolonged crypto winter. We are already beginning to see layoffs and cost-cutting measures being announced by companies trying to cope with the current conditions.
Layoffs & Cost-cutting
Indian crypto companies continued to hire and expand when the market crashed. Though they have been slow to respond, Indian crypto companies have begun to follow suit after their international counterparts like Coinbase and Crypto.com.
Darshan Bathija, one of the founders of Vauld, announced in a blog post that his company would be laying off 30 percent of its workforce. In the post, he cited that the company had made the mistake of hiring in 2022 without looking at the signs of economic slowdown.
WazirX, a crypto exchange backed by Binance, has seen a drastic drop in revenue. Its vice president, Rajagopalan Menon, told Bloomberg that the company had cut down on all non-critical costs, adding that they are only hiring critical employees and avoiding expenses at all costs.
BuyUcoin and Unocoin are also cutting down on non-essential costs, hiring only developers and engineers, according to Bloomberg. BuyUcoin CEO Shivam Thakral stated that they are also cutting down on advertising and marketing expenses.
Factors That Have Worsened Crypto Winter
Earlier this year, the government announced that a tax of 30 percent would be levied on income earned from trading virtual digital assets. This came into effect on 1 April. According to a report by Credit Rating for Exchanges, Blockchains and Coin Offerings (CREBACO), Indian crypto trading declined by 40 percent following this policy's implementation.
On top of this, a one percent TDS on all transactions under a certain limit involving virtual digital assets is due to come into effect from 1 July onwards. The industry has warned that this will be detrimental to liquidity and has pleaded for the percentage to be reduced, to no avail.
Another problem is a lack of integration with the banking system.
In April, crypto exchange platforms were suddenly denied access to the Unified Payments Interface (UPI). This made it difficult for traders to make transactions. Following this, many banks and payment gateways also suspended their services to these platforms, making it even more difficult to trade.
How Are Exchanges Tackling This?
Companies have had to rapidly adapt to the volatile conditions in the market. Most are preparing for a prospective future boom in the market; riding out the storm for now by cutting costs and developing new tools to better serve customers in the long run.
Many exchanges are working on developing and diversifying their products and services so they can be on par with international crypto exchanges.
Companies are shifting focus away from advertising and promotional activities, instead choosing to improve performance and work their way around the new government policies.
Sathvik Vishwanath, CEO of Unocoin, told Moneycontrol that companies could not acquire customers in a bear market even if they tried and that it was better to avoid spending on getting more customers.
CoinDCX is one of the few companies that are not trying to cut costs, Focusing instead on optimising the use of resources due to the rising cost of capital.
WazirX has already begun working on a solution to the TDS issue. In a blog post, the company announced that they are upgrading their systems to make the experience as smooth as possible for users.
They will be handling the majority of the tax deductions under the new rules, lifting the burden off of buyers. Other exchanges are expected to follow suit.
(With inputs from Moneycontrol)
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