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Episode 157 · Fintech · 44 min

The asset class India taxed into a corner

CoinSwitch survived an RBI banking ban, a near-second ban and a 30% flat tax with no loss set-off — and its founder's argument is that the 1% TDS, not the bear market, is what broke India. Domestic volumes fell about 90% from their high while the world fell 60%, and India now clears less than 0.1% of global crypto trade. The country he ranks second in the world for Web3 developers has taxed itself to the margin of a market it helps build.

Regulation & policy Payments & fintech Savings & wealth

Ashish

Founder, CoinSwitch · with Vishal Krishna

43:54

Said in this episode

▶ 9:54

<0.1%

India's share of global crypto trading

Asked where India sits in world trading volumes, Ashish answers 'less than even 0.1%' — for a country he ranks number two by developer count.

▶ 9:25

90% vs 60%

Volume drawdown, India against the world

Indian volumes fell almost 90% from their high through the 2022 bear market and the 1% TDS; the global market fell about 60%, and he attributes the gap to taxation.

▶ 8:22

30% + 1%

Flat tax on gains, plus TDS on every sale

A 30% flat tax on crypto profits with no set-off against losses, and a 1% TDS withheld on each sale — reclaimable at filing, but enough to end high-frequency trading.

▶ 21:33

85%

Customer funds held in cold storage

The remaining 15% sits in hot wallets for liquidity, since a cold-storage withdrawal can take up to 24 hours; that hot balance is backstopped by CoinSwitch's own fund.

▶ 26:30

10 → 5,000-10,000

Transactions per second, then and now

Bitcoin at launch could not clear ten transactions per second; Ashish puts today's throughput at 5,000-10,000 with the help of L1s and L2s — an ecosystem figure, not a single chain.

▶ 41:50

~6%

Cost of a US-India remittance today

Seven hops and six to seven days to land, at close to 6% of the amount; he argues a CBDC or blockchain rail could settle it in twenty minutes.

The brief

The argument in sixty seconds

Ashish's claim is that India's crypto problem was never technology and is no longer even legality — it is arithmetic. The RBI's 2018 circular cut crypto companies off from bank accounts, which is to say from payroll, vendors and user funds, and CoinSwitch went global rather than fight it, returning only after the Supreme Court reversed the ban in March 2020. Pent-up demand and a COVID bull run then made the company one of India's largest inside six months and a unicorn in 2021, backed by Andreessen Horowitz, Coinbase, Tiger Global, Paradigm and Sequoia. Then came 2022's tax: 30% flat on gains with no set-off against losses, and a 1% TDS deducted on every sale. He argues the flat rate is merely unfair while the TDS is structural — trade two hundred times and your capital sits with the government — and the numbers follow. Indian volumes fell about 90% from the high against a global 60%; today, with world markets back 80-90%, India is back only halfway and clears under 0.1% of global trade. Meanwhile the country ranks second in Web3 developers while its large corporates run almost no blockchain, because nobody invests in a technology that may not legally exist in two years. His counter-programme is trust you can audit — 85% of customer funds in multi-party cold storage, proof of reserves published every six months since before anyone asked for it — and a bet that CBDC-style programmable money, not tokens, is where India's rails actually change.

Worth your time if you are

Retail investors who stopped trading when TDS arrived

Founders operating years ahead of an unwritten regulation

Policy people weighing a crypto bill against capital flight

Anyone holding assets on an exchange they have never audited

Fintech builders watching CBDC and stablecoin rails

Episode map

Where the conversation travels

Every block is a chapter, coloured by what it's about. Click any of it to jump straight to that minute on YouTube.

Regulation & policyPayments & fintechSavings & wealthData & digitisationConsumer IndiaIndia macro

01Cold open: a ban, then a reopening 0:00 Vishal returns to a beat he last covered in 2020 and Ashish starts at the beginning — the RBI's 2018 circular barring banks from serving crypto firms, a company that went global rather than wait it out, and a return to India in 2020 that made it one of the country's largest players within six months. 02The real ban was on bank accounts 2:13 The chokepoint was never trading but banking — no account meant no payroll, no vendors, no collecting or paying out user funds, and even a global company's development centre in India hit the same wall — and Ashish calls the two-year wait, ended by the Supreme Court rather than by policy, unfair but understandable. 03Not F&O: crypto as an asset class 4:42 He rejects the futures-and-options comparison — leverage and expiries against a long-hold asset class closer to small caps or startup equity — and argues that ₹500 of exposure is the cheapest tuition available, because nobody bothers to learn a technology they have no stake in. 04Unicorn year, then the 30% and the 1% 7:10 2021 brought a unicorn round from Andreessen Horowitz, Coinbase, Tiger Global, Paradigm and Sequoia and a second ban scare that became taxation instead; 2022 brought a 30% flat tax with no loss set-off and a 1% TDS on every sale that ended high-frequency trading, after which Indian volumes fell about 90% from their high against a global 60%, leaving India under 0.1% of world trading volume. 05Users first, then Delhi 10:25 Asked how he splits time between users, investors and government, Ashish says adoption on the ground is what makes regulators look, and that his job through the Bharat Web3 Association is to show what is working, ask for help where it is not, and argue for equal compliance rules so that one bad actor cannot paint the whole sector. 06Why crypto stopped being about payments 12:28 Crypto began in the 2008-09 crisis as an answer to trusting banks with leveraged deposits, but Ashish says the currency use case gave way to a broader Web3 one — and in India, where UPI and the India Stack already make payments invisible, stablecoins solve a problem the country does not have. 07CBDC as the next UPI 15:14 His model is public-private: the RBI issues and controls a CBDC on a government blockchain and companies build on top the way Google Pay and PhonePe built on NPCI's UPI — programmable money that could answer a lender's eligibility question with a yes or no instead of a hundred documents. 08Investors who already know it takes time 17:12 The global funds behind CoinSwitch were early crypto backers themselves, so they priced in an eight-and-a-half-year run through an RBI ban, a partial ban and a banking freeze, and bet on the team rather than push on timelines the founders do not control. 09Irreversible money needs different custody 19:42 A fraudulent bank transfer can be reversed and a crypto transfer never can, which is why 85% of customer funds sit in cold storage untouched by the internet under multi-party, multi-geography, separate-device controls, with 15% in hot wallets for liquidity because a cold withdrawal can take up to 24 hours. 10Proof of reserves, appreciated after WazirX 23:17 CoinSwitch says it was first in the world to publish proof of reserves and does so every six months with its audited financials; the practice was dismissed as third-party theatre until the WazirX hack, when users discovered how much the disclosure told them about where funds actually sit. 11Second in developers, nowhere in platforms 24:50 India is number two in Web3 developers and a global hiring ground, and throughput has gone from Bitcoin's original sub-ten transactions per second to roughly 5,000-10,000 across L1s and L2s — but Ashish wants platforms built and owned here rather than another services decade, and says unclear regulation is why no Indian corporate will invest in a technology that might not exist in two years. 12Land registries and the certificate problem 28:11 Andhra, Telangana, UP and others each run their own blockchain experiments with no cohesive policy, while the obvious wins go untouched — land and property registries verifiable in one click, and college certificates an employer could check on chain — a point sharpened by Vishal's year of chasing papers for five properties after his mother died. 13One app, a ladder of products 30:31 Behind the app sit a brokerage, a custodian and an exchange, and the product ladder follows the user — buy and hold Bitcoin, learn from multilingual content, then futures and options folded in until the user need not know which instrument they are using — all pointed at a stated goal of giving everyone the tools HNIs already have. 14Finance ads, and why local players win 33:14 Vishal's marker for a category going mainstream is television advertising — cars and cola in 2004-05, finance now — and Ashish's answer on incumbents entering crypto is that India rewards the local operator: HDFC and ICICI over global banks, and Stripe's failure to crack a market Indian gateways own. 15The fund: stablecoin yield, staking, NFTs 35:30 The investing thesis is accessibility — a stablecoin-yield company for savers whose bank balance earns nothing, on-chain staking rewards passed back to users, creator and influencer tokens — with a hard line on NFTs, which he calls community and fandom, closer to owning a Picasso than to compounding. 16Programmable money, remittances and CARF 40:03 Ashish's case for a CBDC is that UPI is instant only in front of you while a failed transaction still takes four to seven days to unwind across bank reconciliation files, and the same old rails charge nearly 6% and seven hops for a US remittance — problems he expects programmable money to fix, alongside the G20-level alignment CARF is meant to bring.

Takeaways

Ideas to carry out of this hour

The 1% TDS, not the 30% rate, is what broke the market

Ashish separates two taxes that arrived together in 2022. The 30% flat rate on gains with no offset for losses is merely unfair — he describes people who paid so much tax on their winners that they ended up at a loss overall. The 1% TDS deducted on every sale is structural: trade two hundred times and almost your entire capital has gone to the government as withholding, reclaimable only at filing, which means high-frequency trading simply stops existing. Indian volumes fell about 90% from their high while the global market fell 60%, and he reads that delta as the tax rather than the bear.

▶ 8:22 ▶ 8:53 ▶ 9:25

The 2018 ban was a bank-account ban

The RBI never outlawed holding crypto; it stopped banks from serving crypto companies, which is the same thing done quietly. Without an account you cannot pay salaries, pay vendors, collect user funds or pay them out — and Ashish says even a global company running nothing but a development centre in India hit the same wall. A lot of Indian crypto companies died in those two years, and it took the Supreme Court rather than a policy to end it in March 2020.

▶ 1:27 ▶ 2:58 ▶ 3:42

India ranks second in developers and nowhere in platforms

Ashish's sharpest frustration is not the tax but the pattern it repeats. India is number two globally by Web3 developer count and a hiring ground for foreign companies, yet the platforms everyone builds on — the AWSes and Microsofts of the last cycle — are all elsewhere, and he wants this to be the cycle where the infrastructure layer is owned here rather than serviced from here. The block is regulatory certainty: he says the world's largest companies are running blockchain experiments while Indian corporates run only scattered ones, because nobody invests in a technology that may not exist in two years, and nobody trains on a skill nobody will pay for.

▶ 25:45 ▶ 26:58 ▶ 27:43

An exchange sells custody, not trading

Because crypto transactions are final — no third party to appeal to, no reversal — the exchange's real product is keeping assets away from attackers who include state-run ones. CoinSwitch keeps 85% of funds in cold storage never connected to the internet, released only through multi-party approvals held by people in different geographies on dedicated offline devices; Ashish's illustration is that kidnapping him would yield nothing, because he has no access either. The other 15% sits in hot wallets purely for liquidity, since pulling from cold storage can take 24 hours, and is backstopped by the company's own fund the way a bank holds reserves.

▶ 20:30 ▶ 21:33 ▶ 22:32

Nobody values proof of reserves until someone else is hacked

CoinSwitch says it was first in the world to publish proof of reserves, and does it every six months alongside signed audited financials. The first release drew criticism — why trust the third party doing the attestation? — and the vindication came from outside: after the WazirX hack, users went back and found the disclosure told them how much was held, where, and with which counterparties, verifiable on chain against a published address. His line for it is that in a crisis you appreciate the good things, and in good times nobody appreciates the hard work.

▶ 24:03 ▶ 24:19 ▶ 24:43

UPI is why India does not need crypto payments

The 2008 origin story was removing the need to trust a bank, and Ashish concedes the currency use case was the strongest thing crypto had. But it moved on: the more durable idea is encoding the rules of a loan or a transfer on a chain everyone can see, which is Web3 rather than currency. Payment use cases survive where the sovereign currency is failing, or in the US where stablecoins fill a gap India closed years ago — with UPI and the India Stack, payments here are not a problem anyone feels.

▶ 13:57 ▶ 14:28 ▶ 14:42

The case for a CBDC is the back office, not the coin

Ask a user and UPI is instant; ask a bank and it is still files passed between institutions that do not trust each other. Ashish's evidence is the failed transaction — real time going out, four to seven days coming back — because reconciliation is old technology sitting under a new experience. A CBDC, issued and trusted by the RBI with private players building on top the way Google Pay and PhonePe built on NPCI's rails, would let settlement catch up with the interface, and would take a US remittance from seven hops, six to seven days and close to 6% in cost down to twenty minutes.

▶ 40:34 ▶ 41:05 ▶ 41:36

NFTs are fandom, and pricing them as an asset class is the error

Ashish is blunt about the category his own industry inflated: a cricketer's token or a film-star moment is community and appreciation, not compounding. The value is access — a private event for the fans who bought in, a fundraise for the creator, a VIP tier — and the closest analogy is a Picasso, bought by people wealthy enough not to care whether it can ever be sold. He allows that the future may change this, but the advice today is not to hold NFTs as a financial asset.

▶ 38:33 ▶ 38:47 ▶ 39:49

The numbers, drawn

What the episode measures

Every figure below was said on air — timestamps included, caveats kept.

Conversation share

portion of the hour spent on each theme

Regulation & policy24%

Payments & fintech20%

Savings & wealth15%

Data & digitisation12%

Consumer India10%

India macro8%

Computed from the chapter map of this episode.

The 2022 drawdown: India versus the world

% fall from the high

As stated on air: Indian volumes fell 'almost 90%' from their high after the 1% TDS and the bear market, against about 60% globally — the delta he attributes to excessive taxation.▶ 9:25

And how far each has come back

% of the previous high regained

Global recovery described as '80-90%' (midpoint shown); India 'only back by, say, 50%'. Both are Ashish's stated figures for trading volumes, not price.▶ 9:40

Worth keeping

Lines that stay

In a crisis you appreciate the good things. In good times, nobody appreciates the hard work.

— Ashish ▶ 24:43

It's multi-party. Even if I'm sitting here and somebody kidnaps me, he will get nothing — I don't have access either.

— Ashish ▶ 22:03

Unless you have a stake in something, you will not have enough willingness to learn about it. Even 500 bucks of crypto gives you enough reason to ask why it's going up, why it's going down, why people are adopting it.

— Ashish ▶ 6:40

It's real time for you as a user, but the backend infrastructure is still that old reconciliation — one bank passes a file to the other and says, I received these seven transactions, I didn't receive the eighth.

— Ashish ▶ 40:48

Those are not investments. You as a fan are investing in something and holding it. It has value for you — it is not an asset class.

— Ashish ▶ 38:33

Clips that travel

Short on time? Start here

Retail investors who stopped trading when TDS arrived

The tax that emptied India's order book

The unicorn round, the second ban that became a tax instead, and the arithmetic that took India from a boom to under 0.1% of global volume.

7:10 → 10:25 · 3 min ▶ Watch clip

Anyone holding assets on an exchange they have never audited

Where your crypto actually sits

Irreversibility, state-run attackers, 85% in multi-party cold storage, and why the other 15% has to stay online.

19:42 → 23:17 · 4 min ▶ Watch clip

Users deciding which exchange to trust with custody

Proof of reserves, and the WazirX moment

Why a disclosure nobody asked for became the first thing users checked once a competitor was hacked.

23:17 → 24:50 · 2 min ▶ Watch clip

Anyone who bought a creator token expecting returns

Why NFTs are fandom, not an asset class

Creator coins, a cricketer's NFT, the Picasso liquidity test, and a straight 'don't do it' on holding them as financial assets.

37:26 → 40:03 · 3 min ▶ Watch clip

Fintech builders watching CBDC and stablecoin rails

Programmable money and the seven-day refund

UPI's instant front end over a reconciliation back end, and the case that a CBDC fixes remittances that cost 6% across seven hops.

40:19 → 42:10 · 2 min ▶ Watch clip

Glossary

The jargon, unpacked

TDS

Tax Deducted at Source — 1% of the value of every crypto sale is withheld and paid to the government, reclaimable only when you file returns; the levy Ashish blames for ending high-frequency trading in India.

VDA

Virtual Digital Asset, the government's term for crypto in Indian tax law; a dedicated bill is still awaited, which is why the sector is taxed without being regulated.

Cold storage vs hot wallet

Cold storage keeps keys on devices never connected to the internet — where 85% of CoinSwitch's customer funds sit; hot wallets stay online so trades can settle in minutes rather than the 24 hours a cold withdrawal can take.

Proof of reserves

A periodic disclosure of how much customer money an exchange claims to hold, matched against on-chain addresses anyone can verify; CoinSwitch publishes one every six months alongside audited financials.

CBDC

Central Bank Digital Currency — rupees issued by the RBI on a government-controlled blockchain, and programmable, meaning the money itself could answer a lender's eligibility question with a yes or no instead of a hundred documents.

Stablecoin

A crypto token pegged to a fiat currency, used in the US as a payments and yield alternative to a bank balance — filling a gap Ashish says India already closed with UPI.

Staking reward

The return earned by locking crypto so that it helps verify transactions on a chain; CoinSwitch routes these on-chain rewards back to users whose assets would otherwise sit idle.

CARF

The Crypto-Asset Reporting Framework, a G20-level standard for cross-border crypto tax reporting; because crypto is peer-to-peer, Ashish argues the rules cannot differ from one jurisdiction to the next.

Connections

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EP 18 · Fintech

Full transcript

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