People in India seem to be drawn towards cryptocurrencies, even though the government tried to curb the growth of the digital currency market. The year 2017 has particularly been crucial for the growth of digital currencies because of the increase in the price of Bitcoin; the leading cryptocurrency in the world.
On November 8, 2016, the Prime Minister of India announced a demonetization policy. It was declared that the move was made to stop the circulation of black money and to reduce the level of inflation in the country’s economy. Demonetization sent shockwaves all across the country. People with large amounts of money needed a new way of holding wealth without having to pay taxes.
The usual level of prices of cryptocurrencies in India is on the high side. Market rates are higher than 5-10% if compared globally. Absence of large scale mining facilities is listed as a reason for higher prices in markets as liquidity is affected by lack of supply.
RBI warned people not to buy cryptocurrencies and issued two warnings in 2017. DAFBI, the largest crypto organization back in 2017, asked for legalization of the digital currencies. The organization could gather only 15,000 signatures, in a country with a population of nearly 1.2 billion.
- In March 2017, ASSOCHAM, a leading association held a global summit on Bitcoin and blockchain technology where Bitcoin was described as the “revolution in the field of supply chain finance”.
- Later in May, the demand of bitcoin suddenly increased so much that the exchanges had to restrict the purchases due to lack of supply.
- June saw ZebPay becoming the 7th most popular app in the finance sector on India’s Apple app store.
- Towards October, major Exchanges reported 20000 new users every month.
- 2017 also gave rise to two new exchanges – BitIndia and Coinome
Blockchain technology has also been gaining popularity.
- In February, State Bank of India took an initiative called “Bankchain”. Using blockchain technology Bankchain could share data with all the banks of India.
- Also, in May 2017, Bankchain introduced services to share KYC data across banks. Later the bank launched a blockchain-based KYC system for verification purposes. Other major Banks of India like ICICI, Axis Bank & Yes Bank also started the use of blockchain technology.
- 2017 ended with the launch of a Blockchain Foundation of India and major cryptocurrency players like CoinSecure, Bitxoxo shaking hands with industry leaders like Microsoft, Nokia and Government of India.
To summarize, there was a good response to bitcoin and cryptocurrencies in India, even though the Government constantly issued warnings. The Government has not banned the digital currencies permanently but has scheduled a hearing on Sept 11, 2018 which will probably decide the fate of cryptocurrencies in India. As of now, cryptocurrencies are neither legal nor illegal in India.
Panaesha Capital is a Singapore-based Fintech company with branches in 7 countries; one of them being India. Panaesha Capital provides tools and services aimed at the booming industry of blockchain technology and cryptocurrencies. The Indian government was quick to accept blockchain technology, but wary of cryptocurrencies. Hopefully, the hearing on September 11th will change the game.