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Global crypto exchanges keen to board India’s gravy train

Digital currency exchanges are exploring ways to set up in India – lured by rewards far outweighing the perceived risks,…

The Reserve Bank of India may be the big winner from the move to ban crypto and allow a digital rupee. A large sum is riding on the new bill set to go through parliament. Image: Provided.

Digital currency exchanges are exploring ways to set up in India – lured by rewards far outweighing the perceived risks, while countries as China crack down on crypto

(AF) Global digital currency exchanges are trying to make a beeline for India, lured by the country’s scorching growth potential and lack of regulations restricting foreign ownership, despite the crypto sector still fighting the spectre of a possible ban.

Industry sources say that two global exchanges – Luno, which claims to be a leading global cryptocurrency company, and Bitfinex – the Hong Kong-based crypto exchange owned and operated by iFinex Inc – have already firmed up plans and are preparing to enter India.

Meanwhile. Coinbase, the largest US cryptocurrency exchange, and Vauld, the Singapore-based foreign crypto exchange, have already set up operations in the country.

Reuters reported on Wednesday that US-based Kraken and Hong Kong-based KuCoin are actively scouting the market, and have begun talks to understand the Indian set-up and the entry points.

These exchanges, Reuters said, are weighing their options between setting up a subsidiary or buying an Indian firm, like Binance, the world’s biggest exchange, did two years ago.

“Just the sheer growth this space has seen this year, provides a rare and a huge opportunity for global digital currency exchanges to grow and thrive in India. There are very few sectors that provide the opportunity that India does, while the Reserve Bank of India’s – the central bank’s – clarification early this month, that removed doubts the industry had about a crypto currency ban, is also driving them to increasingly look at India,” Darshan Bathija of Vauld, told Asia Financial.

“Few global crypto markets provide the growth opportunity like India,” he added.

There is no official data, but industry analysts reckon that crypto investors in the country have doubled to over 15 million over the last six months and trading volumes have jumped five times to $2 billion during the same period.

Fears of a ban

Yet, Indian authorities still worry that rich people, criminals, and even stateless elements – like terrorists – could use the borderless cryptocurrencies to fund illegal operations, hide their wealth and even indulge in rampant speculation through digital channels, ungoverned by India’s strict exchange controls.

Such activity, they fear, could destabilize the financial system.

Consequently, in February the government said that it is fine-tuning a new law – the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 – which will be sent for approval soon.

According to the government, the bill intended to create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India.

It also said the bill could prohibit all private cryptocurrencies except the official digital currency in India, which also unnerved crypto investors.

Positive signals

India was set to present this bill to parliament in March, but sensing a ban could stifle the economic power of a tech-savvy, young nation of 1.35 billion people, New Delhi has held the bill back and is exercising greater scrutiny before introducing a law.

The authorities are also loosening up a bit.

In March for instance, India amended the Companies Act to make disclosure of profit or loss on transactions involving cryptocurrency or virtual currency mandatory for companies.

Ajeet Khurana, founder of Genezis Network, a thinktank for crypto-start-ups, told Asia Financial: “The fact is that the government is doing some sort of data collection, and once they collect the data, they may reach a conclusion that it should not be banned. All those who will disclose would have either paid or would have to pay taxes, so that would also give the government an idea of the amount of tax revenue that could be collected.”

Early this month the RBI also clarified that banks and other service providers can no longer cite an earlier order for not offering or dealing with cryptocurrencies, reinforcing cryptocurrencies position as an emerging asset class in the country.

But more importantly, the central bank has also signalled through its statement that it is no longer averse to trading of cryptocurrencies on private platforms.

That, Nischal Shetty, founder and CEO of WazirX, the crypto exchange that was acquired by Binance, told AF, was “a very good move that will put to rest the confusion that banks had, since there was no official instruction from the RBI on permitting cryptocurrency transactions.”

Free market

But the fact that India has no rules specifically for cryptocurrency exchanges wishing to set up in the country, also makes an entry easy.

“India is market with huge potential and no one wants to ignore that. And there are no regulations, or a specific law against foreign ownership hindering their entry, global exchanges are trying to take advantage of the regulatory arbitrage to be the first movers,” the founder of a local crypto exchange, who requested anonymity, said.

But regulations are also regarded as necessary.

Shetty said: “India’s crypto market is in a bull phase. The country has about 60 million investors investing in the capital markets – in equities and mutual funds, but about 20 million in crypto assets. With regulations, India’s crypto investors could exceed the number of capital market investors in two years.”

With reporting by Reuters.

Also on ATF:

India’s RBI clears confusion on cryptocurrencies

India orders disclosure on all cryptocurrency dealings

Indrajit Basu

Indrajit Basu is an India-based correspondent for Asia Financial and wears two hats: journalist and researcher (equity). Before joining AF he reported on business, finance, technology, wealth management, and current affairs for China Daily, SCMP, UPI, India Today Group, Indian Express Group, and many more. He is also an award-winning researcher. If he didn't have to pay bills, he would be a wanderer.


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