COAI Faces Steep Drop: Uncovering the Causes Behind India's Crypto Industry Turmoil

India's cryptocurrency sector has long been marked by both rapid innovation and cautious regulation. The recent steep drop in COAI, a leading crypto exchange, has sent ripples through the industry. While individual traders continue to adapt to the market’s unpredictability, institutional investors are becoming more hesitant—a trend closely linked to the ongoing uncertainty over India’s crypto regulations. As of October 31, 2025, the country’s foreign exchange reserves had decreased by $5.6 billion, including a $3.8 billion reduction in gold holdings, highlighting wider economic pressures that could further destabilize the market, according to a . At the same time, institutional confidence remains low, with investors waiting for regulatory clarity as the current environment continues to prioritize central bank digital currency (e-rupee) projects over cryptocurrencies, as highlighted in a .

Regulatory Ambiguity: A Double-Edged Sword

India’s stance on digital currencies has fluctuated between cautious trial and outright skepticism. Both the Reserve Bank of India (RBI) and the Finance Ministry have repeatedly warned about the dangers of speculative crypto assets, instead steering attention toward the e-rupee as a more secure option, according to the

. This shift in focus has left exchanges like COAI operating in a regulatory limbo. Although no major policy updates were made in 2025, the absence of clear guidelines has only deepened the uncertainty. For example, the lack of a formal tax policy or licensing process for crypto businesses has discouraged institutional involvement, even as retail interest remains high, as mentioned in the .

Wider economic factors add to this unpredictability. A drop in foreign reserves, while

directly tied to crypto, signals a tightening financial climate. When capital becomes scarce, riskier assets like cryptocurrencies often face increased pressure, according to the . This scenario may have played a role in COAI’s recent difficulties, as investors reconsider their positions in markets seen as exposed to regulatory or economic changes.

Institutional Investors: Waiting for Clarity

Large investors, who are essential for market stability, have largely adopted a cautious stance. Coinswitch reports that as of October 31, 2025, the global crypto market was valued at $3.69 trillion, with

accounting for 59.3% of the total, as detailed in the . However, Indian institutional players are reluctant to commit funds to crypto assets without more definitive regulatory direction. The RBI’s focus on developing the e-rupee and the Finance Ministry’s unwillingness to recognize crypto as legal tender have created a gap in investor confidence, as described in the .

This caution is understandable. Without clear policies, even minor comments from authorities can spark market panic. For instance, rumors about possible transaction bans or harsh tax measures—despite no official proposals—have previously caused rapid sell-offs. The current climate reflects these trends, with institutional investors choosing short-term caution over long-term bets, as noted in the

.

The Path Forward: Clarity or Chaos?

For COAI and the broader Indian crypto industry to rebound, policymakers must tackle the core problem: regulatory uncertainty. While the push for the e-rupee is commendable, it should not come at the cost of hindering innovation in the crypto space. A more balanced strategy—such as launching a regulatory sandbox for crypto firms or providing clear tax guidelines—could help rebuild investor trust without putting financial stability at risk, as suggested in the

.

In the meantime, market players should prepare for continued turbulence. Retail traders may keep driving short-term movements, but the lack of institutional involvement will likely prevent the sector from realizing its full potential. As one analyst put it, "India’s crypto market is stuck between the ideals of decentralization and the realities of centralized oversight. Until this conflict is resolved, uncertainty will remain ever-present."