Ever since the Supreme Court lifted the ban on cryptocurrencies in March 2020 there was a new lease of life to the overall cryptocurrency ecosystem in India. The crypto community in India was delighted with the SC ruling and there was a subsequent increase in the volume of cryptocurrency transactions in India.
The lockdown had given a fresh lease of life to cryptocurrencies in India as during the lockdown, amid a lack of investments and business avenues, even traditional investors were forced towards alternative investments. There are, however, reports doing the rounds that a decision is yet to be taken on a bill to ban cryptocurrencies in the long run, with the draft 'Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019' still under consideration according to an RTI reply received by Mohammed Danish, co-founder of Crypto Kanoon.
Thus, despite the surge in volumes, there is a lot of uncertainty prevailing around the overall crypto ecosystem.
Experts speaking to THE WEEK had mixed views regarding the future of cryptocurrencies in India post the lockdown.
“Cryptocurrencies in India occupy the nether world of no man's land. While the regulatory framework that the RBI had promulgated had been struck down by SC, but simultaneously there has been no enabling regulation that has come in the offering. In such an unregulated environment, the possibility of unscrupulous players entering the market to dupe genuine investors, can not be denied,” observed Alok Shende of Ascentius Consulting.
Cryptocurrency players and exchanges are hopeful that the overall ecosystem will revive soon and the demand will pick up in the near future. It is expected that with most of the major global regulators taking proactive steps to regulate the digital currency space and with the supreme court ruling in favour of the petition, SEBI and RBI are expected to speed up the digital currency framework to regulate the digital space.
“Existing traders increased their digital asset holdings. Majority of investments have gone into Bitcoin, Etherum and Ripple. The cryptocurrency markets have been relatively stable for the last couple of months. With political and economic unrest affecting the US markets, the alternative investments increased considerably, soaring gold and cryptocurrencies to fresh highs recently. With the traditional markets underperforming and people being mostly confined to their homes investments towards online trading will keep building up in the coming weeks. As and when the Indian crypto exchanges secure banking relationships, the flow of investments by the Indian investors to cryptocurrencies will pick up its pace,” pointed out Praveenkumar Vijayakumar, Chairman and CEO, Belfrics.
Market observers further feel that the surge in interest in cryptocurrencies can be explained by the fact that investors are shirking away from investments in stocks and preferring safer investments like bitcoins. People also had more time in hand to learn about cryptocurrencies and the lockdown certainly encouraged online exploration.
“Bitcoin and most cryptocurrencies are quite volatile and prices move both ways, making them a prime choice for traders. The lockdown had also removed the possibility of steady traditional income streams for people and had left them with a lot of time on their hands, this has also contributed to the interest in cryptocurrencies," remarked Ashok Kadsur, co-founder of SignDesk.
"Bitcoin has usually been an inconsistent investment option, riddled with peaks and declines. People should be wary of the fact that previous bitcoin bubbles like the current one have burst and should proceed with diligence when investing and trading,” he added.
Cryptocurrency exchange players in India feel that the lockdown had boosted the adoption of cryptocurrencies in India.
“The lockdown had led people to buy crypto for the first time. Moreover, due to its deflationary nature, Bitcoin is emerging as a popular alternative asset class in economies with high inflation. Such countries including India are seeing higher crypto demand and trading volumes than usual. We are seeing steady growth in our signups. Our trading volume is growing at an average rate of 66 per cent every month. There are about 5 million crypto users among a population of 1.3 billion people. India is a sleeping giant, and just getting started,” said Nischal Shetty, CEO and Founder, WazirX.
A few experts also feel that though there is uncertainty regarding cryptocurrencies in India the associated technologies such as blockchain are expected to become popular in the country.
“India is a huge opportunity for the real money ecosystem. The crypto world ecosystem may not benefit the needy people, but a lot of the blockchain technologies can be integrated with financial inclusion platforms that will massively benefit more than one billion Indians. India requires financial inclusion programs backed by modern digital and payment platforms. Existing Jan Dhan accounts can easily become the participants of this network driven by Artificial Intelligence, Blockchain, automation [and other] emerging technologies,” remarked Sudin Baraokar, a global IT and innovation advisor.