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Cryptocurrency Trading in India Resurges Amidst Coronavirus Outbreak as SC Lifts RBI Ban and Bitcoin Price Soars

Editorial and Content Lead, Transfin.
May 26, 2020 12:39 PM 4 min read

The Supreme Court of India (SC) in March 2020 quashed a Reserve Bank of India (RBI) 2018 circular, which barred banks and other financial institutions from facilitating “any service in relation to virtual currencies” - effectively putting a ban on cryptocurrency trading in India.

All regulated entities involved in trading of virtual currencies had to exit the relationship within three months from the date of the circular.

Since then, multiple startups engaged in crypto trading in India have shut shop, including the likes of Koinex, and “crypto-to-fiat” trading has virtually disappeared.

The SC proved to be the knight in shining armour for these platforms when it overruled the RBI's circular on grounds of disproportionality, arguing instead that India should look at other nations which are not only allowing cryptocurrency trading, but also launching their own virtual currencies.


Skating on Thin Ice, Still

Now while the industry welcomed the SC order with much fanfare, the fact remains that the issue is not completely at rest, as legislative action remains outstanding, and the future of cryptocurrency regulations in India hangs in the balance.

With no clarity on aspects like whether cryptocurrencies would be categorised as either a commodity, currency, good or a service, platforms are still not able to capitalise on the apex court’s decision. Moreover, lenders continue to deny banking services to them due to lack of clear instructions from the regulator.

Cryptocurrency exchanges have written to the RBI seeking clarity on their status - as this will decide how they are legally treated by counterparties, or even taxed under the GST framework.


Cryptocurrency Trading in India Resurges Amidst Coronavirus Outbreak as SC Lifts RBI Ban and Bitcoin Price Soars


“Chaos is a Ladder”

However amidst all this chaos, cryptocurrencies seem to be resurging in India. And unlike businesses that have been reeling under the COVID-19 pandemic and the subsequent nationwide lockdown, India’s crypto sector is witnessing significant growth in interest, trading volumes as well as number of new users, several crypto exchange executives insist.

Crypto platforms have observed record-breaking volumes post the lockdown. “Our trading volume before the lockdown in India used to be around $1m. It has grown over 10x in just 60 days,” noted Nischal Shetty, CEO of cryptocurrency exchange Wazirx.

Bengaluru-based Unocoin claimed a ten-fold increase in the volume of trading since the top court order. The numbers doubled between April and May, coinciding with the lockdown and the tanking of the share market.

As per industry estimates, more than 5,000 new users are signing up for trading daily and volumes have gone beyond a few crores.

Not only are the old and existing exchanges seeing a solid rise in business, new ones are also coming up to cash in on the increased interest.

Cryptocurrency exchange aggregator Coinswitch recently announced that it will be launching a new cryptocurrency exchange platform called ‘CoinSwitch Kuber’ for Indian users on June 1st 2020 where users can trade, deposit and withdraw in Rupees for free.

Besides this, Bangalore-based new fiat-crypto exchange Bitpolo announced earlier this month that it is now live.

With traditional asset classes and stock markets taking a beating over worries about a slowing Indian economy battered by the coronavirus outbreak, investors are finding refuge in new asset classes - virtual currencies being an important one.

Moreover, increasing global debt, rising NPAs and cracking banking systems have reinforced the benefits of decentralised networks as resilient and reliable during times of uncertainty.

Tim Draper, a billionaire investor who obtained thousands of Bitcoin from 2014’s Silk Road auction recently said that he has “met several Bitcoin and crypto startups” from India and that he “hopes to be able to fund a number of them.

Furthermore, as the world prepares for an impending financial crisis, digital currency is likely to offer the bigger upside. It is no coincidence that China’s digital currency plan has picked up speed and Facebook last year announced its foray into fintech with a new digital currency named Libra.

The Bitcoin Halving incident that happened on April 11th this year, which sent prices soaring, acted as the cherry on the cake.


Bitcoin price
Source: CoinDesk


Strike When the Iron is Hot

With nearly 190m unbanked individuals, a huge population with access to smartphones, availability of low cost mobile data, and a demographic which is comfortable with the internet, India houses the potential to emerge as a powerful and profitable market for cryptocurrencies and their resurrection, given the apposite regulatory and legislative support.

But considering the flaky nature of cryptocurrencies themselves e.g. Speculation on Bitcoin’s enigmatic creator Satoshi Nakatomo selling the digital currency led to a 10% drop from last week’s’s going to be a big “given”.


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