How two Indian techies bootstrapped their way to build the country’s first crypto unicorn

Apr 15, 2019; Boston, MA, USA; Adrian Spencer wears a unicorn mask as he crosses the finish line of the 2019 Boston Marathon. Mandatory Credit:…
Apr 15, 2019; Boston, MA, USA; Adrian Spencer wears a unicorn mask as he crosses the finish line of the 2019 Boston Marathon. Mandatory Credit:…
Image: Brian Fluharty-USA TODAY
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The co-founder of India’s latest cryptocurrency unicorn almost didn’t launch his company.

Three years ago, Sumit Gupta, CEO and co-founder of Mumbai-based cryptocurrency exchange CoinDCX, was excited to launch his company. In April 2018, Gupta and his long-time college friend Neeraj Khandelwal had all their ducks in a row, including pooling in their savings to make up 90% of the total capital for their startup. By the end of May, the duo had aligned all the investors it needed when the axe fell.

“We were raising a seed round, and then the news about the RBI (the Reserve Bank of India) circular came,” Gupta told Quartz over a Zoom call. The circular he is referring to was the Indian central bank’s restriction on banks to facilitate transactions related to virtual coins. “We had almost signed documents, but then the round completely broke and we had to use almost all our savings to run it for another few months,” 30-year old Gupta recalls.

Neeraj Khandelwal (left) and Sumit Gupta (right), co-founders of CoinDCX
Neeraj Khandelwal (left) and Sumit Gupta (right), co-founders of CoinDCX

The central bank, in its circular on April 6, 2018, had prohibited banks from offering any service to customers of cryptocurrency exchanges, which put many cryptocurrency exchanges in the country in a precarious position. Exchanges such as Zebpay had to shut shop because of the circular.

Three months after this setback, an investment from the US-based global investment firm Bain Capital gave CoinDCX the breathing room to play the cryptocurrency field. At that point, with no clarity on the future of cryptocurrency in India and a question mark over its legality, it was a gamble. And one that seems to be finally paying off.

On Aug. 10, the exchange announced it has raised $90 million (Rs668 crore) in a Series C funding round from a host of international investors at a valuation of $1.1 billion, making it the latest tech unicorn venture in India. The investors in the round included Facebook co-founder Eduardo Saverin’s B Capital Group, Coinbase Ventures, Polychain Capital,, and Jump Capital, among others.

This has also been possible because the Indian government and the RBI appear to have turned softer towards the idea of digital currencies. In March 2020, two years after the RBI’s 2018 circular, the supreme court revoked the ban and advised banks to not follow the circular for denying services to cryptocurrency platforms or investors. The announcement of the phased introduction of sovereign-backed central bank digital currency (CBDC) by the RBI last month has paved a way for wider acceptance of cryptocurrencies in general.

Plus, the Covid-19 pandemic enthused many investors to invest in cryptocurrencies for attractive returns, and decentralised format. A combination of these factors has enabled CoinDCX to create a user base of over 3.5 million since its inception. Gupta wants to take this to 50 million.

His dreams have origins in a city where thousands of India’s future techies are trained.

How CoinDCX began

Gupta met his co-founder Khandelwal, nearly 14 years ago when they moved to the city of Kota in the western state of Rajasthan to prepare for entrance exams for elite engineering colleges. They bonded over the shared gruelling schedule to prepare for the entrance test for the Indian Institute of Technology (IITs), and both of them made it to the top-ranking IIT Bombay.

Their paths diverged after this and Gupta relocated to Tokyo for a job as a software engineer with Japanese electronics giant Sony in 2014. It was here that he first heard about blockchain technologies and cryptocurrencies. He came back to India in 2015 and began digging deeper into the world of digital currencies. He found that his old college mate and he still shared a common passion, this time for crypto.

“One thing was very clear to me that there are very few technologies that make you so passionate…where you feel that these are going to be very revolutionary,” Gupta says, “So just like how (the) internet was two decades back, blockchain can basically power the future of finance. Web 3.0—that’s a whole new world altogether,” he adds.

This new world also came with a fairly steep learning curve.

Learning by trading in cryptocurrencies

Before landing on the idea of starting an exchange, Gupta traded in cryptocurrencies, which helped him get familiar with the intricacies of the asset class. “During our investing days, we realised a lot of problems…struggling with challenges like liquidity, pricing was not good, very limited tokens were available,” Gupta says. “The whole experience of buying crypto for the first time was very difficult sending crypto from one interest to another address.”

This, he says, helped him give the customers what they needed in terms of security, insurance, and ease of buying and selling.

Their own learning also helped them educate new investors—and regulators—especially within a policy climate that looked at cryptocurrencies with suspicion.

“Back then people were like, ‘Oh, it’s not regulated!'” Gupta says. Once the RBI circular came out in 2018, he found that people were commonly referring to digital currencies as illegal, merely because these are not legal tenders. “So we had to explain to them the difference between a legal tender and (the) legality,” he says.

Bridging this gap with the regulators was even more difficult. “Regulators are having a difficult time understanding the difference between bitcoin and ethereum, a smart contract, and store of value,” Gupta says. “All of these tokens are not bitcoin, and we had to explain them in a language which is easy for them to understand. For example, how much electricity or how much cost it takes to run a monetary system.”

Gupta says he remains “very very confident” that the Indian authorities will not impose a ban on private digital coins. This is because CoinDCX has actively engaged with regulators, including being petitioners in the supreme court case challenging the RBI circular.

“The market was not very favourable for crypto companies. But it was fine because we knew deep within our hearts that we’re fighting for something which is for the long term,” Gupta says. He believes that just being a part of an industry that is so “revolutionary” is a pleasure in itself.

For now, though, he has set his sights on international markets.

“Whatever challenges that we have seen in our journey, we’ve solved or tried to solve that so that other people who are in our journey right now from four years ago, don’t face the challenges,” Gupta said with a smile.

CoinCDX’s expansion plans after funding

In recent months, cryptocurrencies have piqued the interest of all sorts of investors, especially the younger generation for a number of reasons: easy trading, ease of transferability, and high returns. Out of the total investor base with CoinDCX, around 75% is in the age group of 20 to 34 years, Gupta said.

The recent funding, led by Saverin is aimed at building new products with cutting edge innovation, improving existing product array, and strengthening exchange infrastructure and product team in order to provide a more secure trading experience with instant liquidity to investors. “We are constantly getting interests from a lot of investors, unlike our initial part of our journey,” Gupta quipped.

In the coming months, CoinDCX will launch the CoinDCX Prime initiative, its latest offering in the high net worth individual and enterprise space, providing legally vetted and safe investments as well as Cosmex, its global trading product. Cosmex is expected to give access to one-third of global liquidity, with seamless trading within the crypto-to-crypto space. For instance, an investor can buy a litecoin by selling bitcoin.

“Investing is now simpler using our product, but trading is still quite complex. There are a lot of tools like margin, so many tokens, different base pairs, and competitive derivatives. Again, (it is) complex for a retail investor. So, Cosmex strives to solve that problem by building a very new, powerful, yet very simple crypto trading experience,” Gupta said.

In the coming years, CoinDCX would want to enhance features on its trading platform, but remittances can be the next big thing on the cards. “How do you solve the $100 billion remittance industry using crypto? How can crypto emerge as an asset like how we treat the stock market? I think crypto in the future will become as mainstream as stocks,” Gupta said.

Manavi Kapur contributed to this report.