What has been the impact of TDS on trading volumes at CoinDCX?
On the investor side, there is very little impact, as most of them are long-term holders. So when they buy, there is no TDS involvement. As for traders, they are definitely readjusting their portfolios and positions. But we have not yet realized the full impact of TDS. Perhaps, three weeks into the implementation, we would have a better understanding of the impact.
The threshold of applicability of the TDS provisions is ₹10,000 or ₹50,000 in the case of specified persons. How do you ensure that these provisions are respected?
We deduct the TDS from the first transaction. The challenge is that in crypto every exchange is different and there is no common layer between them. It is impossible for us to know whether you have made transactions above or below the threshold. So to be in line with the policy, we basically started charging TDS on all transactions.
The 1% TDS is quite difficult for traders, and especially for exchanges. Do you plan to take legal action to challenge it?
No, there is no legal remedy per se. We need to sit down with government and political think tanks and iron this out. The way the 1% TDS hurts the ecosystem is that because of it there will be less crypto adoption, fewer companies will form in the crypto and web3 space, and there will be fewer jobs created. It is important that policy makers understand these points and draft regulations and tax laws accordingly.
Are users allowed to withdraw cryptos and rupees on your platform?
Most users of our platform do not make crypto transfers. Their main form of inflow and outflow of funds is in the form of Rupees. This number could be as high as 98-99%. Thus, the transfer of INR funds remains available for all our users. On crypto transfers, we have disabled it for retail users.
With respect to crypto transfers, because we are an exchange, for some people, who help us build liquidity, it is important for us to enable crypto transfers. For them, we have checks in place, based on eligibility. So, crypto withdrawals remain open for people providing us with liquidity, but for the majority of people on the exchange, it remains disabled.
Some crypto platforms have gone insolvent globally. How is CoinDCX Placed?
Any business that only engages in lending and risk management is facing the heat. When you think of CoinDCX, the business model is very different. We rely on transactional revenue. Thus, we make income by charging a small fee for buying and selling. This capital is kept in custody and not deployed on any risky protocols.
If for some reason CoinDCX becomes insolvent, can creditors seize crypto and customer money?
They can not. We have ensured the right terms and conditions, policies and standard operating procedures to ensure that crypto belongs to customers and not shareholders or creditors. Additionally, the crypto is not held on our balance sheet.
What was the nature of recent advisories to crypto sites by ED?
They wanted to understand certain trade flows. The market is so new that most of the political think tank and government agencies do not understand how order execution occurs. And that was the context of the conversation we had with ED. The main focus of the ED was to understand how crypto businesses operate and how transaction flows flow from state to state. And we were able to provide them with this information satisfactorily.
Have you taken cost reduction measures?
We have undertaken zero cost reduction measures as we are in a hyper construction phase. We have enough capital to last the next four or five years, even if we have no income. In fact, we’re hiring more people and building more systems to make sure that every time the market goes up, people will come back to CoinDCX. We are now close to 560 people and are on track to reach our forecast of having 1,000 employees by the end of the year.
Last year, millions of investors entered the crypto market, but they are now sitting on losses. What would you tell them?
I would recommend people think about putting small amounts in a frequent time frame, so they don’t have to think about market timing. The second advice I would give is to use some of the smart tools available on the platform such as stop loss or limit orders etc. which allow them to trade smart. And number three, which is probably the most important piece of advice, is that now is the time to really learn about the types of cryptos that are out there that will stand the test of time and thrive over a long period of time.
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