There is lack of support from Indian banking sector: KuCoin CEO Johnny Lyu

KuCoin, one of the largest crypto exchanges in the world, quickly got off the bat and registered with the Financial Intelligence Unit-India (FIU-IND) in the country in March.

It became one of the first foreign exchanges to become compliant, months after the exchange along with eight other offshore peers including Binance, OKX, Houbi were sent show cause notices and later blocked for not following local anti-money laundering regulations.

KuCoin had also committed to setting up a ‘localised team’, look for banking and fiat partners for offering payment solutions and invest into educating users and supporting blockchain and Web 3 projects in the country.

Headquartered in Seychelles, KuCoin was founded by Chun Gan and Ke Tang in 2017. It currently has over 31 million users across 800 digital assets, in more than 200 countries and regions. According to independent crypto data aggregator, CoinGecko, KuCoin ranked sixth among the top global crypto exchanges in terms of market share in the January-March quarter of 2024.

While Binance cornered a majority of the market share at 49.7 percent, Coinbase had 6.8 percent market share and KuCoin had about 4.2 percent market share in the same period, the data said.

In an exclusive interview with Moneycontrol, KuCoin’s CEO Johnny Lyu gets candid about the company’s India ‘glocal’ strategy, challenges of operating an exchange in the country, strategic investment plans, having a common global crypto regulatory framework and more.

Edited excerpts:

It’s been four years since you took over as the CEO of KuCoin, how has the crypto industry changed over these past years? There seems to have been a stringent regulatory crackdown on this sector globally especially ever since the FTX collapse happened. 

My general impression is that the biggest change is going from disorder to order. Four years ago, things were quite disorderly and quite a mess. The BTC ETFs are a very good first chapter. Before the ETF incident there would be different levels of regulations, governance, and even penalties that occurred in countries from now and then. And as a practitioner in the industry, we've all witnessed these events and regulations to cover, for example, anti-money laundry, and the fiat channels etc. Now we are starting to see different actions being taken across the entire industry. Four years ago, that was non-existent. So it was more of a grey area.

I welcome the new direction, I think this will benefit the entire sector. And that also indicates that we are being accepted by the traditional finance market. These measures and movements precisely now are proving on that we had every reason to have faith in the industry.

In many countries, the governments are exploring a common global regulatory framework for crypto. Is this the right approach for regulations, how do you assess this at an industry level?

It is rather hard to pinpoint on whether a global common regulatory framework could produce any benefits. While the regulatory framework is just like the constitution of a country which should exist, the details should be fleshed out by governments from different countries in accordance with their respective financial systems. So it should be in the end, individual and specific to each country's specific circumstances, and this is also similar to political alliances that are forged at a governmental level. But when it comes to implementation, there could still be a lot of conflicts and challenges to resolve.

There is no such thing as good or bad. From our perspective, we are willing to offer our experience in the industry as to what potential problems may occur, because we have been experiencing compliance in many countries around the world.

The reason we were able to respond so rapidly is that we have experience in global compliance for many years and we have a professional compliance team that is dedicated to contingency. We also have a well-established contingency mechanism at KuCoin...We have prepared ourselves with industry standards and a product infrastructure etc. So when things such as this happened, we were ready because of all the experience that we had at different battles over the years. And for us, we always adopt a strategy that combines globalization and localization when it comes to business development. And that general direction also determines that we always have our focus on compliance. What happened was already within our expectations. So in a nutshell, we were prepared when it struck.

That being said it was not a smooth journey along the way. It was quite painstaking because in the very beginning, the government did not understand us well enough. We were a stranger, but later we in a way helped to the government to formulate regulatory rules with our experience, and the government with our assistance began to understand the industry and the sector better. This also helped us gain more insight as to how we could conform to the government regulations and just standards. So on that I would say we have both the experience and capabilities on the battleground and that is the underlying reason behind the rapid reaction and turn around.

While KuCoin re-entered quickly, peers like OKX discontinued services in India and Binance is still figuring the way out to enter over the next few months. What are the key challenges you see in the India market, what more can the government do to make the market more conducive for crypto exchanges and startups?

I think at present the largest challenge is the (lack of) support from the traditional financial sector, namely the banking sector, because the banking sector remains to be a key node in the financial industry of any country. Without a smooth channel with the traditional financial market, in other words, without any interactions with the banking sector would be counter-effective to the efficiency that we can potentially have. But that requires dialogues with the government and us helping the government to gradually improve the infrastructure at large. And so, give it Binance or other exchanges, they are facing very similar issues.

That is also the fundamental issue that we are confronted within the Indian market. And if that channel is smooth, and everything else will be a very smooth ride. And so if we can adopt a similar on regulatory strategy as a traditional financial sector, then things can happen much faster and a more effective manner when it comes to business expansion.

And the second question is what the local government can do to further promote, for example, the startup ecosystem. I think, in order to promote any industry or anything at all, you need to create space. The other way is through education, so the government can provide courses and training in universities, so that the public can have more of an understanding of the sector.

From a day-to-day perspective, there could be infrastructure for the general public to understand just the convenience of blockchain and blockchain finance. That would be the two dimensions: first education and second is the livelihood of the people.

Since you mentioned banking, in your recent statement, KuCoin has said that it is engaging with local banks and fiat partners to offer localized payment solutions in India. Can you elaborate ?

We are still watching on the banks and the banking sector at large at present. Right now we are collaborating with a third party firm, Onramp.Money, that converts fiat to crypto. So we can utilize some of our respective advantages to offer a seamless conversion...And right now these two sides or these two ends are exchanging with each other in terms of regulatory experience or experience of being regulatory on regulatory compliance.

We are also keeping dialogues open with the banking sector, letting them understand our needs in terms of information and we also try to solve problems and the pain points for the banks. So right now we're at quite a transitory stage on this and we hope that we can resolve the problems that are relating to payment and having our own solution or the local payment solution itself is the first step of the victory.

What is the India opportunity like and what is the larger game plan going to be for KuCoin in the country? Tell us more about the ‘Glocal’ strategy.

The India market is very important to us. The growth was already very significant from years ago. . For the entire industry, India provides a great number of users and is also a valuable reservoir of practitioners -- and practitioners that are able to bring productivity and productive relationships. They are the fundamental and a core force of this industry that are driving the development of the whole ecosystem. And of course, the other participants that are equally indispensable, but I think it is quite badass for India to actually do it and this is quite meaningful.

As to our future plan or game plan in the India market, we plan to increase our investment to support the further growth of the industry ecosystem. And the pre-existing KuCoin education programs will be further improved and open so that we can help to elevate the understanding of the general public. And so, not just the government is obligated to provide more information, knowledge, and we as an industry practitioner will also do the same and on the platform will also engage on in activities and functions that that can help project owners to achieve the same goals.

KuCoin is also setting up an India team. Have you already hired for the same? How big will the team be?

We will hire local employees in India and we already did that job because we have Indian community managers and we also have professionals and local talents working in our marketing development. It is a very important interaction that we have with the local governments. We really value such inter connectivity with the local community as well. So, it’s just a matter of time before the India oriented team takes shape.

KuCoin was also planning to make strategic investments to support blockchain projects in the country. Have you identified any good projects you plan to back in India?

KuCoin Ventures and Labs are accepting project applications from across the globe, including applications from India. Investment is just one aspect, but for an emerging market as important as India, the core is education as I described earlier.

In terms of funding, we are looking for local funds for collaboration. And again, I'm not in any capacity to disclose more details at this point. But we've been doing that for some time.

Though Bitcoin prices have been fluctuating, given the positive developments like Bitcoin ETF approval, and Bitcoin Halving, is it safe to assume that the next crypto boom is around the corner? 

I think we're already in a bull market, when it is around $67,000. Isn't that bullish enough? I feel very positive about it, and in terms of ETF that was within our expectation, which also indicates that the price increase right now is also within our expectations.A few years ago, when it was around $20,000, we knew that it would rise to $60,000-70,000. We had no doubt about that at all. This whole process has always been very bullish, and the so-called fluctuations are nothing but just cyclical. So this is a normal cycle in the financial market. So I think there should not be any fear about bears or bulls in the shape of the market. My perspective is perhaps a bit different from the general users because I'm a professional or practitioner in this industry. What I look at is the long term instead of the short, one to two months, right in front of my eyes.