With the passage of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 on January 29, 2021 in the lower house of the parliament, i.e., Lok Sabha, investors in India might be quite uncertain about their move. What is the destiny of Bitcoin in India? PCEX Member, a leading cryptocurrency exchange in India, explains it and tries to answer many unanswered questions.
What does the bill say?
“To create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”
Does the bill aim at banning all cryptocurrencies except the sovereign or state-regulated one that has been proposed in the bill? Probably, the excerpt from a question-and-answer session in Rajya Sabha signals that it could be an attempt to regulate cryptocurrencies rather than an outright ban.
Responding to a question on cryptocurrency during a question-and-answer session in Rajya Sabha, in the upper house, Minister of State for Finance Anurag Singh Thakur, said: “The government does not consider cryptocurrencies legal tender or coins and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system.”
A complete blanket ban seems impossible
As of January, a single bitcoin amounted to INR27,613, 69 (USD37,937). The value of bitcoins worldwide exceeded 100 billion US dollars with millions of dollars’ worth of bitcoins exchanged daily as of May 2018. In India, Bitcoin is not just traded across all big and small exchanges but is a dominant trading option across spot and futures markets with every exchange. At PCEX Members, thousands of users buy and sell bitcoin every day, hour, or minute. The number of users has skyrocketed during the pandemic. WazirX, another crypto exchange in India, reported a 125% increase in user signups in the past six months, as per a press release on Live Mint dated December 2, 2020. Citing the growing investors, volume, and worth of bitcoin in India, it seems difficult for the government as of now to apply a blanket ban.
Indians see bitcoin as a hedging tool
After 8 November 2016, the date of demonetisation in India, institutional (e.g., Mutual funds, insurance companies, etc.) as well as retail investors took Bitcoin investment as a hedging option. India accounts for 10 percent of the global trading in virtual currencies. As of 2017, there were 16,754.76 coins in trade volume as per Chris Burniske, a trade analyst. The level of awareness and enthusiasm for bitcoin has increased with the availability of crypto trading exchanges in India. An interesting anecdote is of Tesla CEO Elon Musk mentions of #Bitcoin in his Twitter bio and immediate rise in the price of bitcoin to a two-week high of $36,901 (roughly `26.9 lakh) value. Musk’s 43.8 million followers, including many Indians, went into a crypto frenzy.
Businesses see bitcoin as a driving force
India’s share in global trade (merchandise and services) is increasing exponentially and with this the international payment transaction. Using bitcoin, businesses can make cross-border transactions faster and safer and at a transaction fee that is almost negligible as compared to what they pay through conventional mode. It will also provide them protection against payment frauds, and help them bypass the unnecessary burden due to payment reversals, and chargebacks. Expense tracking becomes easier with bitcoin. Its multi-signature feature is a great way for the board of directors to build consensus about making any investment as none can spend the bitcoin without other’s signature or permission.
Positive signals on bitcoin’s acceptance
From buying food and consumer electronics to making a hotel or restaurant booking – with bitcoin, you can do all. Indian retail market is still in its infancy with not many traders on the list. However, there are some to the likes of GoChoice India and Cynere India that offer consumers to clear invoices in bitcoin. Refer to Spendabit that helps you search and buy items that you can buy for bitcoins. Similar to Amazon or any other retail outlets, where you can perform a search, sort products by price and reviews, and make a purchase, you can do so while shopping at Spendabit. On BitcoinWide, you can discover businesses in India or anywhere in the world that accept bitcoin as payment.
Acceptance of INR at crypto exchanges is also a good indicator. The popularity of crypto, particularly, bitcoin in India has nudged the exchanges in India to allow investors to buy bitcoin in INR. PCEX Member accepts INR as fiat and keeps its lot size smaller to encourage bitcoin investors in India.