The year 2022 was a bleak one for cryptocurrency the world over. A digital asset class that had generated incredible excitement for a few years and was well on its way to becoming a mainstream investment option for digital natives, suddenly went into free fall. Prices fell—even the largest ones by market capitalisation, like Bitcoin, Ether and Dogecoin, lost over 50% of their value. And then the unthinkable happened: FTX Trading Ltd, a $32 billion (around ₹2.6 trillion) crypto firm, filed for bankruptcy in November. It led investors to withdraw $6 billion over 72 hours and FTX’s founder Sam Bankman-Fried was arrested and now faces a trial.
Ashish Singhal, co-founder and CEO of CoinSwitch, India’s leading cryptocurrency trading company and the makers of an app that lets users trade in cryptocurrencies across exchanges, believes 2022 was a “stress test”. “It was a hard time for the crypto ecosystem. But we believe market conditions are improving slowly. Earlier this week, Bitcoin crossed $30,000 for the first time since June 2022.”
In August 2022, the company, along with nine others in the Indian crypto space, too was subject to an investigation by the Enforcement Directorate for possible contraventions of the Foreign Exchange Management Act. A company spokesperson told Mint at the time that the company was cooperating with the agency. There have been no further developments.
Things have improved since. “In India, several regulatory steps have been taken towards making crypto mainstream and the whole ecosystem more accountable, and these are very welcome,” says Singhal, 34, pointing to the fact that just last month, the Union finance ministry issued a notification granting virtual digital asset (VDA) platforms like CoinSwitch the status of a reporting entity under the Prevention of Money Laundering Act of 2002. This means VDA platforms are now legally required to conduct KYC (know your customer) procedures, monitor and record all transactions and report any suspicious activity to the ministry’s financial intelligence unit.
“We want more transparency, we want to be regulated the way other financial ecosystems are. This will increase customers’ trust in us and in crypto and blockchain technology as a whole,” says Singhal. “We have moved from a ‘ban cryptocurrency’ to a ‘regulate cryptocurrency’ narrative and I see that as a great step forward.”
We are meeting at the CoinSwitch office in one of the tech parks that line Bengaluru’s Outer Ring Road. This 5km stretch on the city’s south-eastern fringe is a hive of tech activity; arguably, it is the nucleus of technological innovation and business in India. It’s not a coincidence then that CoinSwitch—which is working on the cutting edge of technology today, blockchain and Web3—is located here.
The term “Web3”, coined by Ethereum co-founder Gavin Wood in 2014, refers to a decentralised online ecosystem based on blockchain (a digital, distributed “ledger” formed through a consensus of replicated, shared and synchronised digital data spread across sites, countries or institutions, without a centralised database). As the internet grows, blockchain technology is seen as the best way to regulate it, besides more obvious uses in the creation and exchange of cryptocurrencies.
CoinSwitch, which is close to hitting 20 million users (its closest rival, CoinDCX, has 13 million users), was founded in 2017 by Singhal, Govind Soni (chief technology officer) and Vimal Sagar Tiwari (chief operating officer). Valued at $1.9 billion, it is backed by investors such as Andreessen Horowitz (a16z), Tiger Global, Sequoia Capital, Ribbit Capital, Paradigm, and Coinbase Ventures.
Apart from being a crypto platform, the company, which has over 500 employees, has taken the lead in cryptocurrency education through in-depth and well-researched blog posts, videos and explainers that are essential reading not just for those dipping their toes into the asset class but experts who are looking to stay on top of a fluid environment.
“Trust” is a word Singhal uses often. In January, soon after the FTX debacle, they released their first “proof of reserve”—essentially revealing the extent of their financial holdings on behalf of clients—verified by an independent consulting firm, which determined that the company held around $131.09 million in assets and that its total holdings exceeded those held on behalf of the users of its platform (in the worst-case scenario, then, it would be able to pay out its customers, unlike FTX).
“This year, we started with radical transparency as a theme for our entire organisation, both internally as well as externally…. We asked ourselves—what are the right standards that every exchange or a crypto company should follow to make sure that an FTX-like event can never happen again?” says Singhal, explaining that while such events are not unheard of, they could erode trust in the entire ecosystem in an unregulated market. “It can negate everything we have done so far. FTX was a good reminder of that. The need for self-regulation and clarity kicked in at that point, so it was ultimately a good thing for us.”
When it comes to the future of crypto startups in India, Singhal firmly believes a downturn is the best time to build. “We know this is true from previous down-cycles in tech—the best technology products were built through the dotcom bubble burst. I see this happening in the crypto space as well,” he says, naming recent landmark events such as “the Ethereum merge” (a process that, very simply put, upgraded the cryptocurrency Ethereum to a better, more secure blockchain and led to the creation of Ethereum 2.0, a new version of the currency); Ethereum’s Shapella upgrade, a revamp that improves the network’s performance, security and efficiency; and Polygon’s advancement of Zero-Knowledge (the cryptocurrency company and tech platform launched an ID product based on Zero-Knowledge, or ZK, technology that will allow users to verify their identities/credentials without revealing sensitive information). “Many critical pieces of Web3 infrastructure were being laid during this time despite the downturn and I believe it will help us become stronger in the future,” he adds.
Given that he now works with such advanced technologies, it comes as a surprise that Singhal has not always been “high-tech”. In fact, his first startup was an online tailoring service, Urban Tailor.
“Growing up in Meerut (Uttar Pradesh), I was always a good student, a first-bencher and class topper—the quintessential ‘Sharmaji ka beta’ Indian parents mock their kids about,” laughs Singhal. “I was, on top of that, ‘Doctorji ka beta’—there were many doctors on my dad’s side while my mom’s relatives were mostly engineers. I was preparing for both initially but in class XI, I discovered my love of math and bent towards engineering.”
He got his engineering degree from the Netaji Subhas University of Technology, Delhi (where he met his current co-founders), and was recruited by Amazon in Bengaluru in 2011. “I have always wanted to build things. In college, I created a note-taking application for Android that would convert handwritten text into digital text,” says Singhal. At Amazon, the most interesting experience was working in “Jeff B Teams”—special projects directly under Amazon founder Jeff Bezos, on services and products such as one-hour delivery in New York; Singhal led the tech team from India. In his last year, 2015, at Amazon, he was working on “softlines”—a term for personal items such as clothing, homeware, jewellery. It made him realise that while ready-to-wear was being solved by e-commerce, customers were not always happy with the product. He set up Urban Tailor in 2015. Unfortunately, they had underestimated the magnitude of the problem—the company went under in a little over a year.
Singhal went on to work with the Singapore-headquartered interiors and home design company Livspace, whose founders Ramakant Sharma and Anuj Srivastava allowed him and his co-founders to start an aggregator for cryptocurrencies (values of cryptocurrencies differ across exchanges and this allowed the three to select the best price) as a side project for their own use—this eventually led to CoinSwitch.
“Failure has shaped me. My failure to run Urban Tailor taught me how to run a business. CoinSwitch wouldn’t have been a success if I hadn’t learnt these nuances and we love to talk about failures here as well. Every quarter, we discuss what the failures were in the past three months. That tells us we are pushing the boundaries,” says Singhal.
Late last year, the company launched a Web3 fund to incubate early-stage startups building blockchain solutions for the rapidly evolving landscape. “We firmly believe India will be a launchpad for large Web3 projects and we need to nurture ideas in this space fast and early,” says Singhal. What kind of companies are they looking at? “People often ask how crypto and blockchain can impact industries across the board.... One example is, say, garment manufacturing. You can use blockchain to trace a product through all its stages, see at a glance where it was made, where the cloth came from, even where the cotton came from, which designer designed it, which unit crafted it… and the fund is supporting many such companies...,” says Singhal.
The next stage is the launch of a wealth management platform to offer investment support for all kinds of assets. “Indians traditionally see only two ways of making money: earning it and saving it, right?” he asks. There isn’t much awareness about making your money work for you. “Less than 3% Indians invest beyond fixed deposits currently but interest in stocks, mutual funds, is growing exponentially. For India to have true wealth creation, the retail participation in markets should be much higher and CoinSwitch wants to play a critical role in building that ecosystem. Ultimately, we want to make Indians rich.”