Koinex

» see koinex.in as it lived, on the wayback machine

~ the goodbye ~

Koinex opened in 2017, in the middle of the year India discovered cryptocurrency. Three founders led by Rahul Raj built a digital asset exchange with rupee deposits and a long list of tradable coins, and within about a year it was the biggest in the country by volume. The numbers the company gave on the way out were over a million registered users and more than three billion dollars of trading volume across some twenty million orders. For a two-year-old exchange in a market with no rules yet, that was a very fast build.

The rules arrived in April 2018 and they were not rules so much as a door closing. The Reserve Bank of India issued a circular telling regulated banks to stop providing services to any person or business dealing in virtual currencies, and to unwind the relationships they already had. No law had banned cryptocurrency in India. The central bank had removed the banking layer underneath it, which for an exchange holding customer rupees amounts to the same thing.

What followed was fourteen months of attrition. Payment gateways refused service and bank accounts kept closing, and each time Koinex found a new banking relationship it lasted until somebody in a compliance department read the circular. A draft bill in 2019 proposing to ban cryptocurrency outright did the rest of the work, and Indian trading volumes fell away.

On 27 June 2019 the exchange stopped trading at two in the afternoon. Wallets stayed open until 15 July so users could withdraw their coins. The rupee balances were the harder problem, because the company's own accounts holding customer deposits were frozen, so Koinex returned that money out of its own resources. Rahul Raj's note blamed the delays by government agencies in clarifying a regulatory framework, and said the last fourteen months had been the toughest of running the business.

~ the chronicle ~

~ the circular ~

The April 2018 circular closed three Indian exchanges before this one. Zebpay went first and moved out of the country. Coinome and Coindelta followed it, and Koinex was the fourth. The Supreme Court of India eventually struck the circular down in March 2020, nine months after Koinex was already gone, and the exchanges that survived the gap went on to have a very good decade. Timing was the entire difference between the two groups.

~ fourteen months ~

The fourteen months before the shutdown are the part worth reading. An exchange with no banking is a business that cannot take a deposit or pay out a withdrawal, which means the product keeps running while the company underneath it stops. Koinex spent that year keeping an order book alive on top of a payments layer that kept getting cut, then burned its own capital honoring withdrawals the frozen accounts could not cover.

India in 2018 was not a small place for this to happen. Crypto trading there was a retail phenomenon of exactly the kind a central bank worries about, millions of people with a phone and an app in a country that had watched demonetization a year and a half earlier. Turkey ran a version of the same argument later and got to it from another direction: the central bank banned crypto as a payment method in April 2021, and what people here remember from that period is Thodex, whose founder left the country with the deposits. Koinex is the other shape entirely. It was regulated out of existence and paid everyone back on the way down, which makes for a much duller story and a much better one.

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