Why India’s 50 lakh battle-scarred bitcoin traders refuse to give up
People who have remained invested for a long period have seen several bitcoin obituaries.
Love in the times of strife
• “Before Budget 2018 (when finance minister Arun Jaitley said bitcoin is not legal tender), the price of bitcoin was nearly Rs 7 lakh, and it fell to Rs 4 lakh after.
“Today the prices have again come back to the same level." – Ajeet Khurana, head, Blockchain and Cryptocurrency Committee of India (BACC), a part of the Internet and Mobile Association of India which represents crypto exchanges.
• "At peak, the platform did USD265 million in 24 hours. It fell to USD15 million, and now it is even lesser,” an executive from a popular crypto exchange tells ET Online on the condition of anonymity. The top two Indian exchanges, Koinex and Zepbay, fell from the global top 10 to top 80 in trading volume.
• However, trading has not stopped.
“About 2 lakh users are trading daily.” - Exchange executive cited above.
• The founder of a Mumbai-based fintech firm says, "It is not necessary that investors are doing transactions in Indian rupees. They may be doing cryptocurrency-to-cryptocurrency trading. For instance, those who have already bought bitcoin may be trading it for Ethereum or Ripple or Litecoin."
• Responding to investor love, since January 2018 Zebpay has added four new tokens. Koinex too has added a bunch of new tokens.
• People who have remained invested in bitcoin for a long period have seen several bitcoin obituaries.
“They feel this time will also pass." - Mumbai-based investor, who first invested in bitcoin in 2016.
Banks and government play bad cop
• Recently, top banks suspended the accounts of major bitcoin exchanges in India. Investors were unable to trade or withdraw the invested amount into their linked bank accounts. Some exchanges notified investors that a withdrawal or deposit window would open on a specified date for 24 hours.
• Two of India’s oldest exchanges, BTCXIndia and ETHEXIndia, stopped trading. In a letter to investors, BTCXIndia blamed “government actions”.
• "The payment gateway companies were instructed not to provide services to bitcoin exchanges. Let’s say [cryptocurrencies are] completely banned; the concern the government would have is money laundering and violation of FEMA laws because investors could transfer value out." - Koinex co-founder Rahul Raj.
• However, Khurana of BACC says, “Exchanges with [only] one banking relationship suffered. The situation is not as bad now. We have approached the Reserve Bank of India (RBI) and they have very clearly said that they have not asked banks to shut bitcoin accounts. I think banks are not thinking enough and are reacting without enough knowledge.”
• He fears that if banking channels are choked, investors will move into the informal cash and third-person channel.
“It will become a nightmare as nearly 50 lakh Indian traders hold bitcoins.” – Ajeet Khurana, BACC
• “The lack of support from the banking sector is causing difficulty to customers as processing of payments takes time," says Nischint Sanghvi, head of exchange, Zebpay. However, he is hopeful that governments around the world will find a way out of the impasse.
• The fintech founder quoted above says, "Even after so many warnings banks are not completely shutting down bitcoin exchanges because they are making big bucks from these exchanges."
In an unlikely twist, a few public-sector banks are staying put.
• The writer of this piece has an account with Zebpay, which continues to have a relationship with Central Bank of India. Koinex’s account with Bank of Baroda also remains intact at the time of writing.
Happy ending on the cards?
• The government has set up a committee to design a policy framework on bitcoin by March end. At a recent event organised by NSE, Subhash Chandra Garg, secretary, department of economic affairs, said, “We are not comfortable with the word ‘coin’ or ‘currency’ and prefer ‘crypto-assets'.”
This could be a clear indication that the government is comfortable classifying bitcoin as a commodity.
• "It has become too big for anybody to control now,” Raj adds. “Even if the government imposes a blanket ban, people will move their funds via liberalised remittance scheme to their friends and family, asking them to invest on global exchanges on their behalf,” he says.