India’s fickle relationship with Bitcoin

The last two weeks can only be described as one of the wildest Bitcoin price rides that we’ve ever experienced. The currency started by breaking the five-figure ceiling at $10k, then continued its upward trajectory by surpassing the $18k mark.

Bitcoin’s increase in both price and popularity has resulted in some countries taking stricter measures to try and regulate Bitcoin and cryptocurrencies in general. China has managed to shut down all their crypto exchanges, while both Bangladesh and Indonesia have prohibited crypto from being used as mediums of exchange.

India also hasn’t recognized Bitcoin as a currency. However, the country doesn’t have rules set up with regard to trading. Because of this, online platforms, of which there are at least 11, have free reign, much to the chagrin of the country’s central bank.

However, India has made a habit of issuing warnings to “users, holders and traders of virtual currencies including Bitcoin” of “economic, financial, operational, legal, consumer protection and security-related risks.”

Bitcoin buyers don’t seem to be paying much attention though. In fact, it has been reported that the demand for this seemingly super cryptocurrency far outweighs the supply thereof, resulting in a Bitcoin price of as much as 20% more than international prices.

This isn’t a deterrent for potential buyers. India’s online platforms claim to have at least 30,000 users trading at any given time. These customers have the option of easily purchasing a complete Bitcoin, or a fraction of one.

Satvik Vishwanathan, the co-founder of one of the country’s trading platforms, Unocoin, had this to say to BBC:

“Last year this time we had 100,000 registered customers. Now we have gone up to 850,000. The price is surging and from my analysis the people who are investing in Bitcoins are investors who have big pockets and are willing to take risks on their portfolio.”

Bitcoin’s popularity is not just evident on trading platforms. E-commerce platforms in India, such as FlipKart and Amazon, give customer the option of using Bitcoin to pay for their goods by converting them into fiat currency before payment.

However, this lack of infrastructure and regulatory processes could pose a security risk. Vishal Gupta, co-founder of Diro Labs, had this to say on the matter:

“There is no architecture to hold the Bitcoins safely, so right now people are taking a physical print out and keeping that in a locker. What the government can do is start a global wallet registry so that we know who is transacting and where the transactions are being done. If my Bitcoin is stolen then with this global wallet at least you can track it.”

Bitcoin isn’t the only popular kid on the blockchain. Cryptocurrencies such as Ethereum and Litecoin are also attracting the interest of Indian investors, perhaps resulting in regulation measures being implemented sooner rather than later.

Amitabh Kant, the CEO of India's premier think-tank Niti Aayog, said:

“There are revolutionary changes in this sector and huge progressive moves here. Technology is always ahead of government and is a big disruptor. It is important that we keep pace with technology and make regulatory changes. It is an issue that finance ministry has to debate and do inter-ministerial discussions to take it forward.”

Even though its price is reaching record highs, Bitcoin is still prone to bouts of volatility, previously dropping to 50% in a single day. However, this has not deterred major financial institutions like CME, CBOE and Nasdaq from launching Bitcoin futures.

The cynics are still out in full force, with Warren Buffett calling the currency “a real bubble”. Even if said bubble does burst, Bitcoin doesn’t seem to be going anywhere, especially with established firms taking an interest in integrating the currency into the mainstream financial industry.