Web3 in India after the 1% TDS — what survived
Two and a half years after the 1% TDS came into force, the Indian Web3 ecosystem has consolidated around a different shape. Here is what made it through, and what each survivor is doing now.
In April 2022 the 1% TDS on every crypto transaction came into force in India. The instant effect was an 80% drop in active trading volume on Indian exchanges. The slower effect was a complete reshaping of which Web3 businesses could survive here and which could not.
Two and a half years later, the dust has mostly settled. The Indian Web3 sector now has a stable shape that is materially different from its 2021 shape. Here is what survived, what each survivor is doing, and what the new market actually looks like.
the survivors by category
category │ pre-TDS count │ post-TDS count │ survivor profile
exchanges (spot) │ ~30 │ ~6 meaningful │ FIU-registered, banking-backed
exchanges (derivatives) │ ~0 onshore │ ~3 launching │ offshore-connected, new
custody │ ~5 │ ~3 │ institutional-focused
wallets │ ~10 user-facing│ ~4 │ multi-chain, India-native
tokenisation platforms │ ~3 │ ~5 (new) │ B2B / asset-backed
DeFi protocols (India) │ ~2 │ ~2 │ stable, narrow
education / media │ ~8 │ ~3 │ premium-content shift
hackathon / dev orgs │ ~6 │ ~4 │ funded by global protocolsThe total business count is smaller. The composition has shifted toward institutional, regulated, and B2B. The retail-facing player count is dramatically down.
what spot exchanges did
The handful of surviving spot exchanges — CoinDCX, CoinSwitch, Mudrex, ZebPay, Giottus, WazirX — all consolidated around a similar product evolution.
The retail spot trading product is now the smallest line. The 1% TDS made it economically unappealing for active traders, and the remaining users are the HODL cohort that does few transactions. Revenue from spot is structurally compressed.
The growth lines are adjacent: staking services (where the user holds crypto with the exchange and earns yield), institutional custody (where the exchange is the qualified custodian for Indian businesses’ crypto holdings), and education/content (subscription products around market commentary, courses, and structured research).
The exchanges that did not pivot to these adjacent lines did not survive. The ones that did are operating at lower revenue than 2021 but with a more diversified and more compliance-friendly revenue mix.
what derivatives exchanges look like
This is the most interesting category because most of it is new post-TDS. Indian derivatives exchanges did not really exist at scale in 2021 — derivatives volume happened on Binance Futures, FTX, and Bybit, accessed by Indian users via VPN.
Post-TDS and post-FIU, the market has fragmented. Offshore access is harder. Indian regulators have signalled (though not formally permitted) that domestic-incorporated derivatives products may be the right answer. Several new players have launched perpetual futures specifically targeting Indian retail, with full FIU registration, INR-margined contracts, and compliance-first architecture.
This is a green-field opportunity unique to India. The 1% TDS does not apply to derivatives in the same way it applies to spot. The compliance moat protects domestic players from offshore competition. The market is smaller than the 2021 spot market but is growing.
what tokenisation platforms are doing
The pre-TDS tokenisation platforms in India were mostly NFT-marketplace clones. Most died. The post-TDS tokenisation businesses look different.
They are B2B. They tokenise real-world assets — real estate fractions, commodity warehouses, invoice receivables, bond instruments. They sell the tokenised product to institutional or accredited-investor buyers, not retail. The blockchain layer is incidental to the business model; what matters is the legal wrapper around the asset, the custody mechanism, and the secondary market liquidity.
This is a category that survives regulatory uncertainty better than retail crypto because the customer base is sophisticated, the regulators are more willing to engage on B2B than on retail, and the underlying asset is not “speculative crypto” but “real asset with a blockchain ledger.”
Five or six Indian tokenisation startups raised seed or Series A rounds during 2023-2024. The category did not exist meaningfully before 2022. It is structurally a response to the regulatory environment, not a pre-existing trend that survived it.
what DeFi looks like in India
DeFi protocols developed by Indian teams continue to exist but are not “Indian-market” products in any meaningful sense. They are global products built by Indian teams, with users mostly outside India. The team being in India does not make the protocol an Indian crypto business.
There is no meaningful “DeFi in India” retail story. The 1% TDS applies to DeFi activity if the TDS-deducting party can identify the user as Indian. The KYC layer required for that identification does not exist on permissionless DeFi, which means Indian users on DeFi are technically in non-compliance regardless of how the TDS rules read.
This is a known issue. The regulator has not enforced it because enforcement is hard. The likely future state is some combination of: TDS at the on-ramp (deducted by the exchange or custodian that converts INR to crypto), wallet-level reporting, or compliance gateways that filter Indian users at the protocol layer.
For now, Indian DeFi activity is below the regulator’s enforcement radar but above the line of “technically compliant.” Builders are not investing here because the risk surface is unclear.
what education and content look like
The Indian crypto education space in 2021 was largely free YouTube content and Telegram groups. The model was driven by exchange affiliate revenue — the content creator drove signups to exchanges and earned a cut.
Post-TDS, the exchange affiliate revenue collapsed (because volumes collapsed). The content creators had to find a different model. The survivors moved to premium subscriptions, paid courses, and B2B research. The free YouTube-and-Telegram model died except at the very top of the distribution.
This is a healthier ecosystem in some ways. The signal-to-noise on Indian crypto content is much better in 2024 than it was in 2021, partly because the volume of mediocre content has dropped, and partly because the surviving creators have premium-product incentives that align them with audience quality.
what builders should know
The Indian Web3 market in late 2024 is structurally a different market than the one most international observers think it is. It is smaller, more institutional, more B2B-tilted, more compliance-aware. It is also growing again, slowly and from a low base, with a composition that is more like Singapore’s market than like the 2021 Indian market.
The 2021 builders who tried to recreate Coinbase or Binance for India have mostly failed. The 2024 builders winning are the ones building for the new shape: derivatives venues with compliance built in, tokenisation platforms for institutional clients, staking-as-a-service for HNIs, custody for businesses, education-as-subscription for the surviving active retail.
The opportunity is real. It is also entirely different from what the 2021 deck slides described. If you are pitching investors with the 2021 thesis, you will lose to the operators who updated.
→ Earlier: the Indian crypto winter was actually a regulatory winter