India’s Crypto State Of Mind

Dawid Paluch
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There is great turmoil going on in India. The Asian country has difficulties with establishing clear regulations concerning crypto. Things get more interesting with Facebook, which has the largest number of accounts from India.

There has been troubling news concerning cryptocurrencies in India. Crypto investors from the country stated that trading with digital coins is forbidden by the government. These revelations coincided with Facebook announcement of the creation of its cryptocurrency – Libra. So we decided to take a closer look at the situation of cryptocurrencies in India.

Anonymous user claims: BAN

It all started with a Reddit post from modgill, an anonymous user of Reddit. He draws a rather pessimistic picture of the crypto industry in India. He stated that it is almost impossible to purchase digital coins in his country. He said: 

The local payment banking system or UPI or NEFT or international transaction have become absolutely difficult. There was down servers every day, cash machines now run dry almost daily. Cash machines getting shut down. To deposit cash, we need to give 3 identification cards, to send money abroad, just forget it. It’s becoming next to impossible.”

He later added that he tried LocalBitcoins, Koinex, etc. We decided to reach him to get some answers to our questions. We asked him when it had all started. He said that the problems began in February 2018. However “the seeds of the issue started way back in October 2017 when the government officials got angry about the power of Bitcoin.” But after February 2018, he couldn’t buy cryptocurrencies for fiat.

We had more questions to modgill, but he turned us down since we didn’t want to pay for the information (that is not how we do stuff here). Because the contact with the Reddit’s user died, we kept digging.

“Just an overtly pessimistic view”

We decided to talk to Nischal Shetty, a founder and CEO of WazirX, a cryptocurrency exchange from India. He is also a well-known crypto expert and its advocate.

We asked him about that post from Reddit if there is any truth in it. He answered that it is an exaggerated opinion. He said:

“Crypto trading or holding is not illegal in India. You can do that without any fear. There have indeed been reports that India may consider a crypto ban, but again, these reports have only been in the news media. The Indian government has made no such statements until now. WazirX P2P works great and has high liquidity making it very easy for people to buy and sell crypto for Fiat. Over 95% of P2P trades get done in under 5 minutes. Sure, there’s been a banking ban for close to a year now in India but our P2P system works amazingly well.”

We also asked about the ‘10 year in prison for trading crypto’ story from Bloomberg, which heated things up. If you don’t know the story, is a new draft bill that would sentence people to 10 years in prison for using crypto. Shetty obviously knew the story, but he said that we shouldn’t be concerned about it too much. According to him:

“All said and done, even if the draft is true, it’s just a draft. Whether it will be accepted by our finance minister or not, only time will tell. Even if it’s accepted, it then has to pass through parliament before it becomes a law. And remember that the draft was made before Facebook came up with Libra. Now that a large company like Facebook is into crypto, the Indian government will rethink the draft and introduce a more favourable crypto regulation.”

Libra can change the landscape

Facebook announced the creation of its cryptocurrency called Libra. It might seem like two separate and unconnected things. But the reality is that India is very important for Facebook. India is the company’s largest market by users (around 300 million accounts). It is also the primary source of news and information for many people. So, the ties between Facebook and India are quite strong.

Nevertheless, can Libra change the view of cryptocurrencies by Indian authorities? Facebook market is worth roughly $550 billion, twice as much as the crypto market. So is it possible that such an enormous player like Facebook would influence the whole digital coin industry in India?

Nischal Shetty believes that Libra could be a breakthrough for cryptos in his country. He said:

“Libra definitely gave that much-needed boost not just to Bitcoin price but also to the entire sector. Traditional media houses all over the world are contacting me to know more about Bitcoin and India’s take on it. This energy seems much more than what we saw in 2017. This time, the growth of the Crypto sector will definitely cross that Trillion dollar mark. With Libra, Crypto is witnessing the opening of doors to mass adoption. I see FB’s Libra as the watershed movement for Crypto.”

It seems that India can’t fight crypto industry for much longer. There is too much money involved. Of course, the Indian government could still resist crypto, but it could meet with the anger of almost 300 million citizens. Any government wouldn’t expose itself to this kind of resentment.

And that was the point when we decided to end this story in the first version of the article. But after that, something happened, which is quite important to the story.

Koinex throws a towel

This year in May, Coinome, an Indian crypto exchange, decided to shut down due to regulatory uncertainty. A few days ago, Koinex ceased its operations for the same reason.

Rahul Raj, the co-founder of Koinex, made a blog post, in which he confirmed the end of the exchange. He stated:

“After months of uncertainty and disruption, we have regretfully decided to shut down all digital assets exchange services and operations today. It is, without a doubt, a sad day for all digital assets and blockchain enthusiasts in India and we can’t express in words how hard it’s been for us to make this decision.”

We tried to reach representatives of Koinex, but none of them have responded yet.

Koinex existed on the cryptocurrency market for almost two years. Now it is closed. Indian regulator strikes once again. So, what will happen with cryptocurrencies in India? We don’t know. And it looks like no one in India knows that either. Sure, Facebook’s coin can help, but it may be banned as well. While Shetty stays positive, we can’t share the same approach. India has a huge potential, and it could open a new era for the adoption of virtual money. Right now, however, it seems that the authorities of this Asian country are heading in a different direction.

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