How ZebPay CFO is navigating regulatory uncertainty in cryptocurrency, CFO News, ETCFO

ZebPay CFO Tarun Jain

Tarun Jain, CFO at top crypto exchange ZebPay, discussed with ETCFO how he is going about fighting regulatory uncertainty in India. The finance executive also shared he is betting on a few other markets like Australia, Singapore, UAE, etc to compensate for the likely business loss emanating from a new tighter taxation policy back home.

Regulatory uncertainty mounts as India is yet to decide on a policy framework around crypto. The country has not yet officially stated its stance on crypto whether it has banned it or not. India has though brought a new taxation policy for virtual digital assets like crypto; the government has imposed a high flat tax rate of high 30% on income from virtual digital assets effective from April 1, 2022. India has also imposed a 1% tax deduction at source (TDS) on payment in relation to transfer of virtual digital assets; this will come into effect from July 1, 2022.

ZepPay has been in the business of cryptocurrencies since the year 2014; the company claims to have over 5 million+ users and $10 billion in overall transactions. Below are the edited excerpts from the CFO’s interaction.

Q: What do you make of regulatory uncertainty in cryptocurrency?

Tarun Jain: There is a lot of regulatory uncertainty. It seems the government does not want to say upfront whether it wants to ban cryptocurrency or not or whether it is legal or illegal. The government seems to be making it tough for the exchanges to operate. There is not such a friendly new taxation regime.

We don’t think the government can keep itself away from this new-age technology for far too long. We are hopeful that the government may re-look at the new tax laws it has brought. We feel confident that the government would at some point give breathing space to the industry..

Q: You mentioned the new taxation regime. How have the new tax laws affected your business so far?

Tarun Jain: There is fear in the industry because of the new taxation regime. Volumes have come down, also because of the low market pricing. The 1% TDS, effective from July 1 may further impact volumes. Liquidity players in the crypto markets constitute 40-50% of the volumes, and it will not become sustainable for them to stay in the markets when this 1% TDS comes into effect.

Overall, we may see business drop up to 50% on account of the new taxation regime and low market pricing overall. Our monthly run rate was earlier $1.5 million, which could now come to below $1 million.

Q: Can Zebpay offset loss in its India business from gains in other markets?

Tarun Jain: We do expect to offset some loss from other markets like UAE, Australia etc but India is our major source of revenue, constituting as much as 70% of the overall mix at the group level, followed by other geographies. Also, in India we have a full-fledged exchange unlike in other parts of the world, so it will take some time to even offset some part of the business loss.

We are focusing on our international expansion. We have already got a licence in Dubai to operate as a crypto exchange, and are very aggressively pursuing our operations there. Also, in Southeast Asia, in Singapore, we are coming out with an exchange very shortly. In Australia, we already have operations, and our focus will be to expand further there. We want to reduce our dependence on one territory. In 2-3 years, India revenue share may come down to 40%, but that 40% would still be a very positive number.

While the crypto volumes may go down in India in the next 6-9 months, we would like to take the current market scenario as an opportunity to improve on our products as well as further enhance the customer experience in this geography..

Q: In the wake of tighter taxation regime back home, how are your ad spends looking like?

Tarun Jain: We are not doing too much ad spends; the company is very wisely making ad spends. We are not luring customers to invest in crypto but we are actually making them increasingly aware of the risks associated with this asset class. On how our ad spending may shape up in the next 6-9 months, we may take a call shortly. But we as a company will not burn cash.

Q: The RBI Governor has said that private crypto assets don’t have an underlying value whatsoever, not even a tulip. Do you have any views?

Tarun Jain: We are not sure if the RBI is not going to define the regulation around crypto; the government may go on to define the same.

That the government has introduced a specific section in income tax regulation, this indicates that it actually does not want to ban crypto. Though it is itself taking a slow step approach and not saying this upfront whether it is a legal tender or not, we hope to see some regulation around it very soon. We have not lost faith in the Indian market..

Q: As the government mulls regulation around crypto and aligns it to the global world, what are your expectations on behalf of the industry CFOs?

Tarun Jain: The government seems to have treated crypto so far not as a currency but more as an asset class. We expect the government to continue treating crypto as asset classes only. So, just like securities attract securities transaction tax, there could be a crypto transaction tax or CTT. Currently, we are levying 18% GST on the transaction fee; but the 18% GST would kill the industry as a whole.

Another expectation would be that even if the government wants to wait on regulation, it may come up with at least clear guidelines in terms of what all KYCs the exchanges need to do. So far we have been trying to do this based on our own senses.

Q: Personally, it has been about seven months into the job for you since you came and were appointed as ZebPay CFO. Looking back, do you think it is too big a bet you have taken, or do you feel confident of driving finance/ business even now, amidst all this regulatory uncertainty?

Tarun Jain: Before I moved to ZebPay, I had been in the mobility space, where I worked with Niti Aayog on the policy front, and the policy in that space continues to evolve today.

Regulatory uncertainty is a part of the game. About 15 years back, there was so much regulatory uncertainty around e-commerce businesses but they have continued to grow over the years. So, I have this belief that the government, after assessing the impact of the new tax laws on revenue, may come with some positive changes for the industry. The future of cryptocurrency is bright in the long-term..

Q: Did you have any sleepless nights in the course of your time at ZebPay so far?

Tarun Jain: (Laughs) I have had a few sleepless nights, but those were more from the point of complying with the tax audits, as well as helping provide inputs for the industry’s recommendations to the government. I never had sleepless nights in terms of why I had chosen this role or whether I had made the right move or not.


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