Rich rewards often come with great risk, and the same is true of the highly volatile cryptocurrency market. The uncertainty of 2020 has increased the interest of the global trading public and large institutional investors in cryptocurrency, a new age asset class. Growing digitization, flexible regulatory frameworks, and the lifting of Supreme Court bans on banks dealing with crypto-based firms have seen more than 10 million Indians invest in the past year. Several major global cryptocurrency exchanges are actively exploring the Indian crypto market, which has been showing a steady increase in daily trading volume over the past year as many investors look to buy value. As the cryptocurrency craze continues, many new cryptocurrency exchanges have come up in the country that enable buying, selling and trading by providing functionality through user-friendly applications. WazirX, India’s largest cryptocurrency trading platform doubled its users to one million between January and March 2021.
What is driving the world’s largest crypto exchanges in the Indian market?
In 2019, the world’s largest cryptocurrency exchange by trading volume, Binance acquired Indian trading platform, WazirX. Another crypto start-up, CoinDCX has secured investments from Seychelles-based Bitmex and San-Francisco-based giant Coinbase. Crypto and blockchain start-ups in India attracted USD99.7 million in investments by June 15, 2021, up from around USD95.4 million in 2020. Over the past five years, global investment in the Indian crypto market has grown by a whopping 1487%.
Despite India’s ambiguous policy, global investors are betting big on the country’s digital currency ecosystem due to various factors such as
• Tech-savvy Indian population
The core population of 1.39 billion is young (average age between 28 and 29 years) and tech-savvy. While the older generation still prefers to invest in gold, real estate, patents or equities, newcomers are embracing high-risk cryptocurrency exchanges because they are more adaptable. India ranks 11th in Chainalysis’ 2020 report list for global crypto adoption, which shows the excitement about crypto among the Indian population. Neither the government’s less friendly attitude towards crypto nor the rumors surrounding crypto are able to shake the confidence of the youth population in the digital coin market.
India offers the cheapest internet in the world, with a gigabyte of mobile data costing around $0.26 and a global average of $8.53. Thus, nearly half a billion users are taking advantage of affordable internet access, boosting the potential of becoming one of the largest crypto economies in the world. According to SimilarWeb, the country is the second largest source of web traffic to peer-to-peer bitcoin trading platform, Paxful. While the mainstream economy is still struggling from the “epidemic effect”, cryptocurrency is gaining momentum in the country as it offers the younger generation a new and faster way to earn money.
It’s safe to say that cryptocurrency could be to Indian millennials what gold is to their parents!
• Emergence of fintech start-ups
The cryptocurrency craze led to the emergence of multiple trading platforms such as WazirX, CoinSwitch, CoinDCX, ZebPay, Unocoin and many more. These cryptocurrency exchange platforms are highly secure, accessible across multiple platforms and allow instant transactions, providing a friendly interface for crypto enthusiasts to buy, sell or trade digital assets limitlessly. Many of these platforms accept INR for purchases and trading fees are as low as 0.1% so simple, fast and secure platforms present a lucrative opportunity for both first-time investors and local traders.
WazirX is one of the leading cryptocurrency exchange platforms with over 900,000 users providing customers with peer-to-peer transaction capabilities. CoinSwitch Kuber provides the best cryptocurrency exchange platform for Indians and is ideal for beginners as well as everyday workers. Unocoin is one of the oldest cryptocurrency exchange platforms in India that accounts for over a million traders through mobile applications. CoinDCX offers users 100+ cryptocurrencies as an exchange option and even provides insurance to investors to cover losses in case of security breaches. Hence, global investors are looking at the plethora of cryptocurrency exchange platforms in India to take advantage of the emerging market.
• Mixed response from the government
A legislative bill regarding bans against virtual currencies that would criminalize anyone engaged in the possession, issuance, mining, trading and transfer of crypto assets may be enacted into law. However, Finance and Corporate Affairs Minister Nirmala Sitharaman allayed the concerns of some investors by saying that the government does not plan to completely stop using cryptocurrencies. In a statement to Deccan Herald, a leading English newspaper, the finance minister said, “From our side, we are very clear that we are not closing all options. We will allow certain windows to experiment on blockchain, bitcoins, or cryptocurrencies.” It is clear that the government is still assessing the national security risks posed by cryptocurrencies before deciding on an outright ban
In March 2020, the Supreme Court overturned the central bank’s decision to ban financial institutions from dealing in cryptocurrencies, prompting investors to enter the cryptocurrency market. Despite lingering fears of bans, transaction volumes continue to grow, and user registrations and money flows to local crypto-exchanges are 30 times higher than a year ago. One of India’s oldest exchanges, Unocoin added 20,000 users in January and February 2021. Zebpay’s total volume per day in February 2021 equaled the volume generated in the entire month of February 2020. Addressing the cryptocurrency situation in India, the finance minister said in a CNBC-TV18 interview, “I can only give you this clue that we are not closing our minds, we are looking at ways in which experiments can happen in the digital world and cryptocurrency.”
Until the government introduces a ban on “private” cryptocurrencies and declares a sovereign digital currency, investors and stakeholders want to do their best to expand the digital coin ecosystem instead of sitting on the side-lines.
Is India moving towards financial inclusion with cryptocurrency?
Once considered a “boy’s club” due to the predominantly male demographic of the cryptocurrency market, the ever-increasing number of female investors and traders has led to a more gender-neutral approach to investing in new and digital forms. Earlier, women used to stick to traditional investments but now they are becoming risk takers and entering the crypto space in India. After the Supreme Court clarified the legality of “virtual currencies”, Indian cryptocurrency platform, CoinSwitch has witnessed a 1000% growth in its female users. Although women investors still make up a small percentage of the crypto community, they are creating fierce competition in the Indian market. Women save much more than their male counterparts, and more savings means more diversification into investments like high-return assets like cryptocurrencies. Also, women are more analytical and better at assessing risk before making the right investment choice, so they are more successful investors.
Increasing mainstream institutional adoption of cryptocurrencies
The uncertainty and panic created by Sars-Covid-19 led to a liquidity crisis before the economic crisis began. Many investors converted their holdings to cash to protect their finances, causing bitcoin and altcoin prices to fall. But even though crypto has suffered a major setback, it has emerged as the best performing asset class of 2020. With the increased vulnerability of the system and loss of confidence in central bank policies and money in its current design, the appetite for digital currencies has increased resulting in a cryptocurrency rebound. Due to the great performance of cryptocurrencies in the middle of the global financial crisis, the uptrend has strengthened the interest in the virtual currency market in Asia and the rest of the world.
Moreover, to accelerate society’s demand for convenient and reliable transaction solutions, digital payment gateways like PayPal have also shown their support for cryptocurrencies that can enable customers to hold, buy or sell virtual assets. Recently, Tesla CEO Elon Musk announced a USD1.5 billion investment in the cryptocurrency market and the electric company will accept bitcoins from buyers, causing the international bitcoin price to rise from USD40,000 to USD48,000. Today two of the largest platforms for making payments around the world, Visa and MasterCard are accepting cryptocurrencies by introducing them as a medium of transaction. While Visa has already announced that it will allow transactions with stablecoins on the Ethereum blockchain, MasterCard will start dealing with crypto by 2021.
What does the future hold for the cryptocurrency market in India?
The Indian cryptocurrency market is not immune to the horrific crypto crash. Despite huge investments from global peers, local investors are still staying away from crypto investments due to the lack of legitimacy of India’s digital currency ecosystem and high market volatility. Although the cryptocurrency market has been growing since last year, Indians own less than 1% of the world’s bitcoins, creating a strategic disadvantage for the Indian economy. The Indian government is planning to appoint a new panel to study the possibility of digital currency regulation in the country as well as to focus on blockchain technology and recommend it for technological improvements.
Blockchain technology’s ability to provide a secure and immutable infrastructure has been realized by various industries to bring transparency to transactions. For countries with more than 15 million crypto adopters, the committee’s new recommendations could be of great value in determining the future of cryptocurrencies in India. However, stakeholders believe that technological and economic strength will make India a key player in the crypto and blockchain market. Gradually, cryptocurrencies are gaining mainstream acceptance, which could lead to higher adoption of digital currencies.
According to another “TechSci Research Report on India Cryptocurrency Market By Offering (Hardware & Software), By Process (Mining & Transactions), By Type (Bitcoin, Ethereum, Bitcoin Cash, Ripple, Dashcoin, Litecoin, Others), By End User (Banking, Real Estate, Stock Market & Virtual Currency) , by Region, Forecast and Opportunities, 2026″, India cryptocurrency is expected to grow at a significant CAGR due to transparency and reducing transaction costs. Additionally, growing adoption of digital currencies and growing blockchain technology are fueling the cryptocurrency market in India.