How a crypto exchange built a new product when regulations grew tougher

Rahul Raj, CEO and co-founder of Koinex.

This article is part of Tech in Asia’s partnership with Decrypt Asia where we publish the revised transcripts from the show’s podcast interviews related to blockchain. This is heavily revised from the original transcript. For the full interview, go here or here.

Rahul Raj is the CEO and co-founder of Koinex, an Indian crypto exchange that supports multiple cryptocurrencies. It is backed by Pantera Capital and Beenext.

Raj talks about Koinex and its products, why they built another product called Loop (a P2P marketplace), and the blockchain ecosystem in India.

Could you tell us about your background and how Koinex came to be?

I studied mathematics and computing at the Indian Institute of Technology. I founded a startup in college, but that did not work out. After that, I joined a couple of startups and did some jobs, until I met the amazing guys with whom I set up the crypto exchange.

My two co-founders were already into crypto, and they are also hardcore techies. We had all been independently following the crypto space in college, but we didn’t take much interest. When we got together, we discussed it and looked at what was happening outside the country. The ecosystem was vibrant, and we saw that there was no multi-currency crypto exchange in India. We identified that opportunity and decided to set up an exchange.

What was the thought process behind building the exchange?

That was when ICOs and tokens were becoming really popular. More people have also developed an interest in all points. But in India, the only available choices were Bitcoin and Ether. So, we realized that the market was progressing and it needed a platform that supports multiple cryptocurrencies, because that’s exactly what’s happening outside the country.

So, we built the platform from scratch, in-house. We didn’t depend on third-party providers. We also did a lot of legal groundwork in terms of regulations, standards, KYC compliance, etc. Then, we tested the product and received great feedback. Ultimately, we launched on August 25 with four coins: Bitcoin, Litecoin, Ethereum, and Ripple. So, we are a fully KYC-compliant exchange from day one, supporting multiple currencies.

What are the important factors in setting up a crypto exchange?

There are lots of things to think about when you set up an exchange, but I believe that the three most important ones are scalability, security, and customer support.

But then, there are also other things: What will the native experience of the apps be like? How will you build liquidity on the platform? How will the entire ecosystem’s activities on the exchange transpire?

All of these things are primary components of building an exchange. You can also build an exchange through a white-label solution and third-party integration. However, you will not have that much control and may probably be stuck with whatever they are providing. That would be pretty difficult.

So, building the entire exchange from the ground up allowed us to be really agile. There were just four of us when we started writing the first line of code. We could decide very quickly on how the product would evolve, what were the things that we could support or could not support, and what other things could we provide for our users. That kind of flexibility and agility proved to be really important in a fast-moving environment.

Tell us about Koinex Loop, the P2P marketplace.

The RBI issued a directive on April 6 that says all RBI-regulated entities (which essentially includes all financial institutions in the country) should exit from their relationships with cryptocurrency businesses within three months.

So, the whole thought behind developing Loop was this: when the directive becomes effective, people would have to keep switching between fiat and cryptocurrency. There would be no way to make that possible with all the exchanges not having any banking support.

What are Koinex’s future plans?

What do you think of the blockchain and cryptocurrency ecosystem in India?