Regulatory clarity key to long-term faith in crypto: Sumit Gupta, CoinDCX

India, to truly excel in Web3, Sumit Gupta of CoinDCX said, must move beyond reactive policies and craft regulations that foster innovation, protect consumers, address risks, and provide clarity

Amid the ongoing turmoil in the crypto market, Sumit Gupta, co-founder of CoinDCX, says the current phase appears more like consolidation within a larger cycle rather than the end of it, with the structural outlook remaining intact. In an email interaction with Kumar Gaurav, Gupta said that regulatory clarity is key to long-term confidence in crypto, and while India has made progress, more work is needed to establish a comprehensive framework. EDITED EXCERPTS:

Why has the crypto market been in a downtrend for the last 4–5 months, and when could it recover?

 

We are operating in an environment defined by rising trade tensions, uncertainty around US fiscal policy, elevated bond yields, and tighter liquidity conditions. When global liquidity tightens, risk assets across the board come under pressure.

 

In the short term, three factors have shaped price action. First, macro uncertainty. When investors are unsure about interest rate trajectories or fiscal stability, capital becomes cautious. Second, the ETF flows. Periods of strong inflows amplify upside. Third, the unwinding of leverage. Despite this, the structural picture remains intact as institutional participation continues. The ecosystem today is far more mature than it was in previous cycles. These fundamentals have not changed because of a few months of price correction.

 

This phase looks more like consolidation within a larger cycle rather than the end of one. 

With Bitcoin down over 45% and Ethereum down 60%, how should investors manage their crypto portfolios? 

Investors should focus less on price and more on process. First, build your own conviction. If you are investing in crypto, you must understand what you own and why you own it. Second, accept volatility as structural. Crypto is an emerging asset class operating within a global liquidity cycle. When liquidity tightens, risk assets correct. When liquidity expands, they recover. The solution is not to avoid volatility, but to size positions responsibly so that volatility does not dictate behaviour. Third, align your strategy with your time horizon. If your thesis is long-term, reacting to short-term price movements usually destroys value. Markets recover when macro stability returns and capital flows improve.

 

Finally, use corrections to reassess quality. Downturns separate strong networks from speculative excess. They flush out leverage and reset valuations. The objective in a correction is simple: preserve capital, strengthen conviction, and stay positioned for the next expansion phase. 

How high-frequency traders are navigitating through this volatility, and what role AI is playing in analysing crypto market data for them?

 

The objective of high-frequency traders is not to predict where Bitcoin will be in three years. It is to capture inefficiencies that exist for seconds, sometimes milliseconds. When markets swing sharply, spreads widen, order books thin out, and price dislocations increase across exchanges and derivatives markets. High-frequency trading firms deploy automated strategies to arbitrage these gaps, provide liquidity, and hedge risk dynamically. Their systems are built to respond faster than human reaction time. They do not rely on sentiment but on data. This is where AI becomes critical.

 

In traditional equity markets, AI systems are processing massive datasets in real time, from price feeds and macro indicators to news and behavioural signals. India’s algorithmic trading market reached $562.20 million in 2024 and is projected to grow to $1,274.48 million by 2033, according to IMARC Group.

 

In crypto, the role of AI is even more pronounced. Crypto markets operate 24x7, across global venues, with fragmented liquidity and higher volatility. AI-powered trading engines can integrate predictive analytics, identifying patterns in volatility clusters, funding rates, derivatives positioning, and on-chain data. Over time, the impact will extend beyond institutions. 

What are the biggest regulatory challenges faced by CoinDCX and how do they impact investors?

 

Regulatory clarity is the single biggest driver of long-term confidence in any emerging asset class. Globally, we have seen structured progress. The US, the United Arab Emirates, Singapore and the European Union have moved toward clearer frameworks that balance innovation with compliance and investor protection.

 

India has taken important steps. Taxation and reporting norms have brought a level of formalisation to the sector. Compliant Indian exchanges today follow strict KYC, AML and tax requirements.

 

However, there is still ground to cover in building a holistic and forward-looking regulatory framework. At present, we are largely regulated through taxation and compliance obligations. What is needed next is clarity on classification, licensing structures, operating standards, custody norms and cross-border treatment. The current tax structure also deserves a relook. 

How can India balance investor protection with innovation in Web3 and crypto?

 

India has made important strides in crypto regulation, but much remains to be done. Ever since the G20 summit organised in India, India has made meaningful progress in shaping a more nuanced conversation around Web3 and crypto policy. We now have clear guidelines for anti-money laundering, KYC, FIU guidelines, FATF rules, in addition to the taxation framework.

 

To truly excel in Web3, India must move beyond reactive policies and craft regulations that foster innovation, protect consumers, address risks and provide clarity for entrepreneurs. This should encompass a study and structured recommendations on oversight, compliance, and risk management. Policymakers should consider facilitating sandbox environments where startups can innovate under regulatory oversight and encourage R&D partnering with academic institutions.