How to choose a crypto-trading platform for investing in digital assets

Trump, who favours a friendly regulatory environment for digital assets, has also backed the idea of a strategic national Bitcoin stockpile.  

Though the cryptocurrency has shed some gains since then, the rally has reinvigorated investor interest in crypto trading.  

In India, platforms such as CoinDCX, CoinSwitch, Mudrex, Binance, and WazirX facilitate trading in Bitcoin and other cryptocurrencies. 

According to Ajeet Khurana, former CEO of crypto-trading platform ZebPay, people should keep a few things in mind when choosing an exchange, like would they be able to move courts in India, or is the exchange under a foreign jurisdiction? Is the updated proof-of-reserve easily available? Is the exchange financially healthy? What other businesses does the exchange run? Is the exchange registered with the Financial Intelligence Unit (FIU)? Does it have robust KYC and AML practices?

Mint compares the three widely used exchanges in India—CoinDCX, CoinSwitch, and Mudrex—based on key parameters, such as the time taken to complete the know-your-customer (KYC) verification, process to start investing, minimum investment amounts, investor protection measures, user growth, and transaction volumes. 

KYC and onboarding

All three platforms boast of an instant KYC process. Users can complete their KYC in under five minutes by uploading proof of their government ID and permanent account number (PAN). 

“Things have been automated and made smooth for users, so you can get the KYC done very quickly,” said Balaji Srihari, vice president at CoinSwitch. 

Anjali Kakkar, vice president of corporate communications at CoinDCX, claims that their KYC verification is instant and hassle-free. 

Mudrex also ensures swift onboarding through integration with India’s Digital Locker flow.

The process to start investing is straightforward across all platforms. On CoinSwitch, users can deposit money into their account and start investing in minutes. 

CoinDCX also enables users to deposit funds instantly and begin trading. 

Mudrex allows systematic investment plans (SIPs) in crypto index funds, starting at ₹500 per month. 

“The UPI verification and deposit happens instantly, within 5-10 seconds. Once the deposit is made, you can proceed to buy the desired cryptocurrencies,” said Edul Patel, chief executive of Mudrex.

All three platforms allow investments starting at ₹100, Patel noted. “You can buy as little as ₹100 worth of Bitcoin or Ethereum, as they are divisible cryptocurrencies.”

Safety and protection 

When it comes to investing in digital assets, it’s of paramount importance to check crypto-trading platforms’ safety features. 

On 18 July, WazirX, one of India’s largest cryptocurrency exchanges, reported a $233-million hack that stole all of its Ether tokens, leaving about 4 million of its users stranded.  

CoinDCX established the Consumer Investment Protection Fund (CIPF) in 2023. The fund is designed to protect customer funds in case of unforeseen events such as hacks or exchange failures, providing an added layer of security. 

Kakkar said the platform contributes 2% of its annual revenue to this fund, which stands at ₹55.57 crore. 

CoinSwitch stores 95% of the funds in highly secure cold wallets. Srihari said this practice is a critical safeguard, as cold wallets are far less vulnerable to cyberattacks than hot wallets connected to the internet. 

By distributing funds across multiple cold wallets, CoinSwitch minimizes the risk of a breach and ensures that most user assets remain safe from potential hacks or exchange downtime. “To run our day-to-day operations, we need only the remaining 5%, so there will be no issue with daily trading activities,” added Srihari. 

Mudrex stores the funds in secured institutional-grade custodians like Sifu and BitGo. According to Patel, large financial institutions and government entities trust these custodians, offering advanced security measures to manage and store funds securely. 

Additionally, these custodians have strong balance sheets and large insurance funds, which provide further protection against potential losses.

User growth and transaction volumes

CoinDCX has 16 million active users and recorded a 15-20% growth over the past year. CoinSwitch has seen a 2.5x increase in user registrations in 2024 and a 7x surge in transaction volumes from January to December. Mudrex reports 3 million users, with a monthly user growth of 40% in 2023-24.

Diversified offerings and costs

CoinDCX lists over 500 cryptocurrencies, CoinSwitch offers 250, and Mudrex leads 650. Fee structures are competitive, with Mudrex charging the lowest fee of ₹25 for every ₹10,000 transaction, compared to CoinSwitch’s ₹40 and CoinDCX’s ₹50.

Other platforms

Other than these three, Binance is also widely used in India. It is registered with the FIU (FIU), enabling it to accept transactions in INR. However, the process of purchasing cryptocurrencies involves an additional step. 

The user must convert INR money to USDT (Tether, crypto replicating USD). This transaction happens in a peer-to-peer (P2P) system, where one user transfers INR to another via Unified Payments Interface or IMPS in exchange for USDT. The process exposes users to criminal risks, as the other users may transfer tainted money.

To be sure, Binance’s operations in the country have faced regulatory scrutiny. The finance ministry has detected a ₹722.4 crore goods and services tax evasion by a Binance Group company. 

Binance didn’t respond to Mint’s queries about its practices in India.

Changing user preferences

Patel said, according to their recent internal survey, a significant portion of Mudrex’s users, over 65%, are now investing with a 5-year or longer horizon. “This shift reflects a broader maturing of the Indian crypto market, where investors are adopting a more patient, buy-and-hold approach.” 

Similarly, Srihari noted CoinSwitch users are diversifying their portfolios, with many investing in a mix of large-cap cryptocurrencies like Bitcoin and Ethereum, unlike assets like meme coins.

Kakkar highlighted that over 51% of CoinDCX users are now investing in a combination of Bitcoin and altcoins, signalling a shift from speculative trading to a more strategic, long-term investment mindset. 

She also observed a rise in the participation of women investors, particularly in the high-net-worth category, marking a positive trend toward greater gender diversity in the crypto market.

How are cryptocurrencies taxed in India?

In the 2022 budget, the government imposed a steep 30% tax on capital gains earned from cryptocurrencies, irrespective of the holding period. Also, losses from digital assets cannot be set off against any other income. 

When converting cryptocurrency to the Indian rupee or fiat currency, the transaction is subject to a 1% tax deducted at source (TDS). This TDS applies to all orders executed after 1 July 2022, making it important for investors to account for this deduction when converting their digital assets into traditional currency.

For crypto-to-crypto transactions, there is no direct tax at the time of the trade. However, these transactions are still subject to capital gains tax. Any profits from such trades will be taxed at 30%, regardless of the holding period.

In the case of crypto gifts, the recipient is liable to pay tax on the value of the gift received, which is treated as income. The tax is calculated based on the fair market value of the crypto at the time of receipt, and it is taxed under the “Income from Other Sources” head.

It’s essential to remember that cryptocurrencies are highly volatile and speculative assets. Mint does not advise investing in crypto without thorough research and a clear understanding of the risks involved. Always invest wisely and consider your financial goals and risk tolerance before making any decisions.