- Cryptocurrency exchange plays an important role in the cryptocurrency world, converting everyday funds into digital currencies and vice versa.
- More investors are rushing to India to grow their wealth, hedge against inflation and diversify their investments.
- Here is how a first-time investor, or a seasoned trader who is tired of the exchange they are currently using, can choose the best crypto exchange that meets their specific requirements.
Cryptocurrency investors in India currently have more than a dozen exchanges open for business – and more are preparing to enter the country. It currently owns nearly INR crore cryptocurrency, with only one exchange accounting for $21.8 billion of trading volume in the first seven months of this year.
For a person who trades in cryptocurrency, the exchange that uses it makes a huge difference in the outcome. “But wait,” she says, “the cryptocurrency is decentralized and can be transferred directly from peer to peer (P2P), right?” This is true, yet more than half of all bitcoin trades in the past two years were made through the exchange.
Here’s a quick look at what the exchange does, how it makes trading easier, services that set them apart, and more.
Exchanges are looking to do more than just exchange bitcoins for rupees
The exchange plays a major role in enabling the trading and use of cryptocurrencies. In simpler terms, it serves as an entry point for “regular” funds like rupees to enter when buying cryptocurrencies, and an exit point for redeeming rupees when cryptocurrencies are sold. Basically, it acts as a medium to connect those who want to buy with those who want to sell. At a sufficient scale, an exchange can have a large enough “order book” to offer “coin pairs” that help users who want to convert one crypto unit to another directly, such as from Bitcoin to Ethereum.
As exchanges gain from the transactions made, they have recently been promoting broader adoption of cryptocurrencies, introducing users to crypto lending, crypto borrowing, and NFT art auctions. In addition to economic functions, law enforcement agencies rely on the identity verification that the exchanges are tasked with performing, to investigate any potential crimes.
In theory, anyone can create a crypto exchange using readily available software modules. However, in practice, only verifiable registered companies are able to accept Indian users and payment methods. This is due to the need for recognition from payment gateways to receive/send money, interaction with government identifiers to verify users with PAN/Aadhaar cards, and tax audit requirements thus reducing risks for night-time airline operators.
India’s largest usable cryptocurrency exchange
Listed here are 16 of the largest cryptocurrency exchanges accessible in India:
|exchange||24 hour volume in US dollars|
|Queen Piece||7.43 billion|
|legendary sea monster||1.47 billion|
Note: Trade volume is variable, this list is in order of 24-hour trading volume in USD, as of November 1, 2021.
We don’t rank them, because different people’s preferences will put different weights on when measured against each other. For example, anyone could prefer a much smaller exchange designed to be easy and well supported, compared to a global giant. One can use two of them before deciding which one is better. However, another focus may be on the massive fees and margins. We detail these subjective factors below to your advantage.
Things to look for when choosing a cryptocurrency exchange
Let’s get one thing out of the way – for a long-term investor who is starting to test the waters with cryptocurrency, any exchange will be fine. The important thing is to save and gain confidence.
After some point, a lot of little things become important. When investing larger sums or looking at short-term deals for a profit, these “quality of life” improvements help speed, convenience, cost and risk reduction. These nine factors are explained below, reconciling the different exchanges with each other to different degrees.
- What is Know Your Customer (KYC) in Cryptocurrency Exchanges?
Global Know Your Customer laws make it mandatory to upload proof of identity to your name and address, before you can transact anything. Fuld is one example of an Indian exchange that welcomes central government-issued ID cards and uses automated systems to remove this hurdle within seconds. On the other hand, Binance had weeks of waiting times to complete the KYC, according to some users.
- Payment methods and currency accepted on cryptocurrency exchanges
Considering that the Indian banking authorities have not yet explicitly welcomed cryptocurrencies, paying money on your exchange is still not as easy as booking a train. For example, WazirX currently prefers UPI transactions that are relatively fast, the Reserve Bank of India (RBI) in the past has prohibited the transfer of funds to cryptocurrency exchanges. Although this issue was resolved in September, India’s largest bank (SBI) is still trying to prevent even UPI transfers by its account holders to exchanges. This partly explains why Indians sometimes take the illegal route of registering/verifying being non-Indian in international exchanges, so that they can use debit/credit cards to add money to their exchange wallet.
- Why is the choice of coins or cryptocurrencies important when choosing a cryptocurrency exchange?
Large selection of coins and currency pairs increases the chance of profit. As a shocking example, Paypal only sells four major coins in two countries at a high price that might make sense for loyal users. Standing at the other end are the likes of Coinbase, which supports hundreds of coins and thousands of buy and sell combinations called currency pairs – such as Ethereum-Bitcoin, Shiba Inu-Tether, and Solana-Bitcoin. These currency pairs allow direct trading between each other, rather than needing two transactions to sell one currency separately and then buy the other.
- Cryptocurrency exchange fee
The fees on trades are the profitable part of the exchange, but it is risky for the trader with meager profit margins. Exchanges charge fees for everything, from deposit to withdrawal, from spot buying and selling to trading futures, and from wallet transfers to lending/borrowing. They may charge a fixed amount or a percentage, with prices varying for different categories of users and subject to change over time, making any frank comparison futile at worst or difficult at best.
- Financial services offered by cryptocurrency exchanges
As the basic facilities of exchange are commodified, the best ones go further. If simple trading isn’t exciting enough, welcome to the world of derivatives like leverage, short selling, lending and NFT technical sales. On this scale, Paypal will get the most boredom, and the Binance platform on the other end will take the derivatives too extreme for European regulators.
- Mobile app features and perks on cryptocurrency exchange on the go
On the go, the easy-to-use smartphone app is useful for investors who may not always have access to a larger screen with room for a lot of detailed charts. For example, CoinDCX offers some convenience in exchange for a compromise of complexity, while Fuld sacrifices nuance to approach convenience instead.
- Peak trade execution speed on different crypto exchanges
The speed of trade execution, even after allowing delays in crypto transactions, has been a sore point with all the exchanges currently serving India. Tragically for savvy investors, when there is chaos in market activity and great opportunities open up, the larger exchanges slow down and the smaller ones simply crash (down for maintenance) due to unexpectedly high traffic. Also in times of high volatility, users noticed that they were forbidden to sell but still allowed to buy, which the exchanges claimed was a way to “protect” their users.
- The importance of the security of digital currency and user data in cryptocurrency exchanges
All major exchanges in India are stationed with user wallets that the exchange handles. In general, a larger and growing exchange is more likely to see the need for and fund a security team, compared to smaller teams. So far, no Indian cryptocurrency exchange has disclosed any security breaches. To reduce risk, long-term investors typically move their crypto holdings from an exchange to a separate wallet that the investor can have more control over.
- User support on cryptocurrency exchanges
You may have questions or issues, even after looking at the relevant exchange tutorials and help section. Options are usually then offered, via email or live chat to get the company’s response, or post on their forums to discuss with other users. The larger exchanges are able to maintain a presence on social media as well, on sites like Twitter and Reddit.
India is said to have a huge adoption of cryptocurrencies, being ranked second out of 154 countries in June 2021 by Chainalysis, a blockchain data platform. In a featured report, he noted that the value of the cryptocurrency market in India has grown from $923 million in April 2020 to $6.6 billion in May 2021. Given the efforts to expand awareness, now is the time for a cryptocurrency trader who is building a fortune to evaluate their cryptocurrency exchange for maximum benefit.
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