Coinbase Bets on India With Direct Rupee Rails Despite a Tax Wall

Coinbase switched on direct Indian rupee deposits and withdrawals on June 1, letting customers in India fund an account and cash out through the Immediate Payment Service (IMPS, the bank network that moves money between accounts in seconds). The rails retire the peer-to-peer (P2P) workarounds that Indian traders relied on for years, and they arrive with spot trading, dedicated rupee order books, and perpetual futures.

The company is spending heavily to win back a market that India’s own tax code has spent three years pushing the other way. More than 70% of the country’s crypto trading volume now runs on foreign platforms, and the 1% levy that sent it there is still on the books.

Direct Rupee Rails Replace the P2P Workaround

The mechanics are what change the day to day. Indian users link a bank account, hold a rupee balance on the platform, and move into or out of crypto in a few taps, a flow that should feel close to using a domestic exchange. Coinbase says deposits carry no fee and bank transfers settle instantly, details set out in the direct INR rails launch announcement.

What ships with the fiat connection is a full trading stack rather than a thin on-ramp:

• Dedicated INR order books, so trades clear against local liquidity rather than global prices, which the company says tightens spreads for users at home.
• Spot markets across major assets, paired with the Coinbase Advanced suite and its charting and application programming interface (API) tools for active traders.
• Perpetual futures, the leveraged contracts that account for most crypto trading volume worldwide, now open to Indian retail accounts.
• Free rupee deposits, with taker fees the company says are set to match local rivals.

The rollout is deliberately staged. Some users who cleared know-your-customer (KYC) identity checks still hit a “Buys not supported” message on launch day, which Akshay Chugh, Coinbase’s India product lead, described as a gradual release rather than a country-wide block. All of it runs on the company’s registration with the Financial Intelligence Unit of India (FIU-IND), the agency that tracks suspicious transactions and oversees crypto compliance.

The Stake Coinbase Built Before the Launch

Coinbase did not build this overnight. For years it has been buying its way into India while waiting for a path to operate, and the receipts are spread across equity stakes, a developer network, and a local payroll.

The biggest line item is CoinDCX. Coinbase has backed the Mumbai exchange since 2020 through its venture arm, and it increased that position in October at a valuation of $2.45 billion, up from $2.15 billion in 2022. The Competition Commission of India (CCI), the antitrust regulator, cleared the minority stake in December, and Coinbase set out its thinking in its case for investing across India and the wider region. The exchange brings more than 20 million users, even after a $44 million hack in mid-2025.

Those equity bets do not stop at one platform. Coinbase is also an investor in CoinSwitch, a rival Indian exchange, giving it a position in two of the market’s larger retail brands before it competes with either.

Then there is the builder layer. Through Base, its Ethereum scaling network, Coinbase says it has put more than $1 million into Indian developers through hackathons, grants, and fellowships; over 4,000 of them have shipped projects on Base, and roughly 150 have grown into startups.

The human footprint counts too. Coinbase employs more than 500 people in India, and it secured FIU-IND registration in March 2025 before reopening signups that December for crypto-to-crypto trading. The rupee rails were always the missing piece, penciled in for this year. “We’ve invested meaningfully in the Indian ecosystem,” said John O’Loghlen, Coinbase’s regional managing director for APAC, calling the firm “here for the long term.”

Why the 2022 Collapse Still Shapes This Launch

Coinbase has run this play in India once before, and it ended badly. In 2022 the exchange launched with support for the Unified Payments Interface (UPI, India’s instant retail payment system), then pulled the feature within three days after the National Payments Corporation of India (NPCI, the body that operates UPI) issued a statement distancing itself from the launch. Brian Armstrong, Coinbase’s chief executive, later blamed “informal pressure” from the Reserve Bank of India (RBI, the central bank). The company spent months on crypto-only trading, then off-boarded millions of Indian users and exited the market entirely. O’Loghlen has since said the firm chose to wipe the slate clean rather than patch the broken setup.

Because we wanted to kind of burn the boats, have a clean slate here.

He made that comment at India Blockchain Week in December, the APAC chief casting the full retreat and compliance-first return as a deliberate decision rather than a forced one. This time the rupee path runs through IMPS, a lower-profile bank-transfer rail, instead of UPI. Both still sit on NPCI infrastructure, so the choice buys distance from the 2022 flashpoint without leaving the same plumbing behind.

A Tax Code That Pushes Volume Offshore

Coinbase is re-entering a market that taxes crypto more aggressively than almost anywhere else, and the rules were just reaffirmed. India’s 2026-2027 budget, presented in February, left the digital-asset tax regime untouched after years of industry lobbying to soften it. For an exchange betting on onshore volume, that is the central obstacle.

A 30% Tax With No Loss Offset

The headline charge is a flat 30% tax on gains from virtual digital assets (VDAs, India’s legal term for crypto), with no way to offset losses against gains or carry them forward. Sitting on top is an 18% Goods and Services Tax (GST) on platform fees, in force since July 2025, which adds to the cost of every trade.

Enforcement is tightening alongside the rates. From April 2026, Indian exchanges must report user transaction data straight to the tax department, and faulty filings can draw a daily penalty. The signal from New Delhi has been consistency, not relief.

Why the 1% Levy Bites Hardest

The piece traders hate most is the smallest number. A 1% tax deducted at source (TDS) applies to nearly every crypto transaction, skimmed at the moment of the trade whether or not it made money. For high-frequency traders and market makers working on thin margins, that 1% repeatedly ties up working capital and makes active trading on Indian platforms uneconomic. Sumit Gupta, CoinDCX’s co-founder and chief executive, has said the high charge and flat tax have “pushed many users toward offshore platforms,” shrinking both visibility and tax revenue.

The Offshore Migration in Numbers

The flight already happened, and it took millions of users with it. More than 5 million Indians moved to offshore exchanges after the tax took effect, and the volume figures are starker still:

• 72% of India’s crypto trading volume ran on offshore platforms in the 2025 fiscal year, by KoinX’s tally.
• $42 billion in trades moved to foreign venues between July 2022 and July 2023, more than 90% of Indians’ total volume, per the Esya Centre.
• 97% of the tax actually collected at source came from compliant domestic exchanges, not the offshore venues where most of the money sits.

That is the wall Coinbase has walked back into. India ranks first in the world for grassroots crypto adoption, ahead of the United States, Pakistan, Vietnam, and Brazil, according to Chainalysis’s 2025 grassroots adoption ranking, yet most of that activity has drained to platforms that never collect the levy. Pulling it back onshore means convincing traders that compliance and safety are worth a tax that foreign venues do not deduct.

Where Coinbase Fits in a Crowded Field

Coinbase is not walking into an empty market. Domestic exchanges led by CoinDCX, CoinSwitch, and WazirX captured the retail base during the two years it was gone, and the offshore giants never left. Binance alone reported more than 300 million registered users worldwide, and it, along with Bybit, has recently secured Indian registration to chase the market formally.

For an Indian trader, the practical choice now comes down to three routes, and they split on the things that decide where volume goes.

On paper, Coinbase’s pitch is the compliant venue with global depth: a publicly traded U.S. parent, institutional custody used by some of the world’s largest asset managers, majority cold storage, and a global order book wired to the local one. Offering leverage fits a wider pattern, too, since the same company is part of the onshore race for regulated crypto perpetual futures in the United States, where licensed venues are trying to pull derivatives volume back from offshore books.

Whether that is enough is the open question. India’s crypto market is projected to grow from about $3.04 billion in 2025 to $14.21 billion by 2034 on independent market-size estimates, a prize worth chasing even with the tax drag. If clean rupee rails and a trusted brand pull real volume back onshore, Coinbase will have shown that compliance can compete with a tax-free workaround. If the 30% tax keeps traders parked on foreign platforms, the rupee rails will have bought convenience for a thin slice of the market while the bulk of the money keeps trading where New Delhi cannot reach it.

Frequently Asked Questions

Is Coinbase legal to use in India now?

Yes. Coinbase is registered with FIU-IND and operates under India’s compliance framework for virtual digital asset service providers, which is what lets it offer rupee deposits, spot trading, and futures to local users.

Do Indian crypto taxes still apply on Coinbase?

Yes. The flat 30% tax on gains, the 1% deducted at source on transactions, and the 18% GST on platform fees all still apply, and Coinbase says it complies with Indian tax law. The exchange’s rails change how you move money, not what you owe.

How do you deposit rupees on Coinbase in India?

Link a bank account and transfer rupees through IMPS, which settles in seconds. Coinbase says deposits are free, and the feature is rolling out in phases, so some existing users will see it before others.

Why did Coinbase fail in India in 2022?

Its first launch leaned on UPI and collapsed within days after NPCI publicly distanced itself, with Armstrong pointing to informal pressure from the RBI. The exchange then left the market and rebuilt around a different payment rail and formal registration.

Is crypto regulated in India?

Partly. Crypto is taxed and exchanges must be locally registered, but India has not passed a dedicated crypto law. That leaves products like leveraged futures in a grey area even as trading itself is legal and taxed.

Disclaimer: This article is for informational purposes only and is not financial, investment, or tax advice. Cryptocurrency trading carries a high risk of loss, and India’s tax rules on virtual digital assets are strict and still evolving; consult a qualified financial or tax professional before acting. Figures are accurate as of publication.