How 3 engineers built India’s largest crypto exchange
Wednesday,made headlines by announcing a $ 260 million Series C Fundraising Round Andreessen Horowitz (a16z), Coinbase Ventures, and existing investors Paradigm, Ribbit Capital, Sequoia Capital India and Tiger Global.
This marks the first investment by a16z in an Indian startup. CoinSwitch Kuber also becomes the second Indian crypto startup to enter the unicorn club after CoinDCX in August 2021.
CoinSwitch Kuber, started in 2017 through Ashish Singhal (CEO), Govind Soni (CTO) and Vimal Sagar (COO), is also India’s largest crypto platform – with over 11 million registered users.
In a video interview with Blockchain History, Ashish tells the story of the crypto exchange platform. About how it all started he says:
“Govind, Vimal and I are all computer engineers, and we have come a long way. Govind and I are college teammates and Vimal was a mutual friend. We have always loved technology and tried various innovations, as well as competing and winning several hackathons. The idea for CoinSwitch came from one of these hackathons.
The three friends were working at Amazon, Microsoft, and Zynga. But the lure of turning their hack into a product put them on the path to entrepreneurship. Thus, CoinSwitch Kuber was launched.
Origins of CoinSwitch Kuber
When trading crypto, the co-founders had seen the price of crypto vary slightly from exchange to exchange, depending on supply and demand. If users wanted to get better returns from the market, especially on a large scale, choose the right exchange played a critical role.
So they set out to build a crypto exchange aggregator, which provided real-time data on the best prices and exchanges for a certain cryptocurrency to trade.
“When we built a simple crypto exchange aggregator into a hackathon, we never saw it as a business. But when we launched the product online, we started to see users joining us. The simple and intuitive nature of the product worked because users needed simplicity in the crypto world, ”he adds.
The goal was to make cryptography easy to understand and accessible to the Indian masses. However, the Reserve Bank of India asked banks not to support crypto transactions in 2018, effectively signaling a ban.
This forced Ashish, Govind and Vimal to take the first product, known simply as’CoinSwitch‘, to the world market. With Redwood capital supporting them in a seed round, the journey has begun.
While the platform saw transactions worth millions of dollars around the world, Ashish and his team were still focused on India. And the opportunity presented itself March 2020 when the Supreme Court rescinded the RBI ban.
This open season spelled for CoinSwitch and a number of other Indian crypto exchanges such as ZebPay and WazirX.
“We focused on India and launched CoinSwitch Kuber, an application just for this market. Our mission was to make crypto trading as easy and accessible as ordering food online, ”says Ashish.
Simplicity is the key
In just under two years, the platform has attracted more users than other Indian crypto exchanges. Ashish attributes this to a Simplified UX and the decision not to provide users with certain trading features.
“Other exchanges did a great job as well, but their products were more suited to traders used to seeing features like order books and buy / sell orders. We differentiated ourselves by targeting those who had never seen an order book before and didn’t know what it was. So we built ourselves for new retailers and made all those complexities go away, ”he explains.
Most crypto exchanges charge a transaction fees, but CoinSwitch Kuber is more of an aggregator. It does not charge users directly. Instead, it trades with crypto exchanges on transaction fees as maker (which creates buy / sell orders for users, thus creating liquidity).
“We give users a fixed price and aggregate the offer on the backend. Our execution engine is the source of income. But in the future, revenue models may change as new innovations and regulations come into play, ”adds Ashish.
Loans and withdrawals
Some of these new revenue models potentially include ready and staking features, for which CoinSwitch plans to use part of the new funding.
Although Coinbase has recently had issues with the SECOND due to his proposed loan feature and ended up dropping the idea, Ashish believes it may work differently in India.
“Here we look forward to work with regulators and gain confidence in them. We’ll tell you how and why we plan to release these new features, and how it won’t be a problem for them. We will also clarify exactly how we will protect user funds and why these features can benefit the Indian economy, ”said Ashish.
Due to the lack of clear regulations regarding crypto trading, CoinSwitch recently crypto withdrawals paused for its users. This is generally seen as a move that goes against the ethics of crypto as self-preservation of funds is one of the fundamental principles of decentralized currency.
Although Ashish expects a backlash, he explains that this is a temporary decision that will be overturned once the right regulations are in place.
“It was perhaps the most difficult call we have had to take. But regulators fear that crypto could be used as legal tender and undermine the sovereignty of the Indian rupee. In addition, they are concerned that cryptography could not be used for money laundering and other illicit activities. So far, no one has figured out how to stop it, but by disabling crypto withdrawals on a temporary basis until the right policies are in place, ”he explains.
Build an investment platform
Going forward, the founders are looking to turn CoinSwitch Kuber into a complete investment destination and a platform with crypto and traditional financial instruments available to retail and institutional investors.
“We are for investing and want to go beyond crypto. There must be a merger between crypto and traditional financial instruments investment. The younger generation, in particular, will want to diversify beyond crypto. So we aim to become an investment platform for the masses and simplify every use case, ”Ashish said.
However, the platform for retail investors will be different from the product intended for institutional investors. CoinSwitch maintains that it cannot offer a retail platform for large companies and funds looking to add crypto to their balance sheets.
“A large fund wouldn’t feel comfortable keeping their crypto assets with us. In addition, they would need access to the built-in dashboard, escrow account features, etc. With the new funding, we plan to build a product for institutional investors and provide them with all the security and accessibility tools they need, ”he says.
The investor connects
CoinSwitch Kuber sees this future as a paradigm shift in finance and the internet, and thinks its venture capitalists think the same.
a16z, which is famous for making bold bets on “Software that eats the world”, is an example. “Our investors are some of the brightest and are looking at the big picture. There is no manual as such for crypto companies to talk to investors, but it is crucial to talk to those who understand this paradigm shift, ”adds Ashish.
Interestingly, in 2013, a16z invested $ 25 million in Coinbase at a time when crypto companies in the United States were struggling to move forward due to the lack of clear regulation and the inability to find banking partners. Coinbase went to give a16z its the biggest release to date when it went public earlier this year.
Now, a16z and Coinbase Ventures’ investment in CoinSwitch Kuber in India is taking place in a similar situation to that of the United States in 2013.
In an upcoming bill, the government could define crypto and compartmentalize virtual currencies based on their use cases, or require that all private cryptocurrencies except state-issued virtual currencies , be banned in India.
But market sentiment now suggests the former is more likely. Additionally, investor confidence and the influx of foreign investment from a16z and Coinbase Ventures could be an indicator of positive regulations and a generally optimistic outlook for the future of the Indian crypto market.