In this article, which is the first in a series of country insights, we take a look at the state of cryptocurrency in India and how changing legislation is favoring the adoption of P2P trading and helping people to buy and sell cryptocurrency .
Cryptocurrency and its legislation in India has been a topic covered widely over the past year, with more and more voices joining the conversation.
The central bank in India (RBI) imposed a ban on all financial institutions dealing with cryptocurrency settlements, such as exchanges, as a precautionary measure in a press release. The largest centralized exchange in Indian at that time, Zebpay, closed its doors as a result and relocated to Malta, considered one of the worlds cryptocurrency hotspots.
The basic principle of cryptocurrency is that it is trustless and based on protocol. It is here to disrupt the old system by offering people an alternative and choice to opt out of the current financial model of fiat cash should they wish.
Whilst adoption still has a long way to go, the numerous cryptocurrencies out there have gained attention and media spotlight for both good and bad reasons. India has always been a country of innovation and adoption so it is no surprise to see the eagerness in learning and building within the new technological space taking root.
Buying crypto in India & the risk assesment
The reason for the banking ban in India is due to the negative potential surrounding cryptocurrency. It is also not unreasonable to assume, taking into consideration we are talking about a trustless system of cash and decentralized technology applications, that there is a potential fear of losing control.
This is because cryptocurrency is seen as a new system that is setting up to remove the current system of trust - centralized banking systems. Before allowing the financial systems in place to interact with cryptocurrency and even allow people to use their accounts to buy and sell cryptocurrency, the RIB needs to fully ascertain what risks there are and determine how best to handle customer obligations amidst a Governmental stand that has not been verified.
The opening statement in section 13 of the press release on the matter was not particularly negative but continues on with a warning and wariness to its application and use by bad actors. It begins:
“Technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system.”
It then goes on to say...
“Reserve Bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs.”
The Indian Government has so far only stated that they do not accept cryptocurrency as legal tender.
To the government, cryptocurrency is simply not money. An outright ban on the use of cryptocurrency and declaration of illegal status has not been given but the clarity of regulation needs to be addressed. A final decision and stance was due to be released by the end of 2018 but was sadly not forthcoming with the Supreme Court demanding an answer by October 2018 which it missed.
For the 1.3 billion Indians under government rule, however, this has not stopped interest in cryptocurrency or their efforts to buy and sell cryptocurrency either locally or internationally.
Support of buying cryptocurrency is going viral
With so many buyers and sellers of cryptocurrency undeterred, there have now been reports of financial institutions obliging their customers to sign a waiver, that explicitly states that the customer will not buy or sell cryptocurrency using their bank accounts.
The image of the statement soon went viral with two influential accounts on twitter @DesiCryptoHodlr and cryptocurrency advocate, @Apompliano, sharing the news to the world.
The reality is that cryptocurrency turns 1.3 billion Indians into their own bank via a simple mobile phone and an internet connection. The ability to buy and sell cryptocurrency gives every Indian a store of value and means they have the ability to easily buy and sell across borders. In short, the ability to buy and sell cryptocurrency matters.
Buying and selling cryptocurrency also offers privacy and independence from a centralized fiat system. This in itself is always going to get a lot of attention moving forward.
India wants to buy and sell cryptocurrency
The hashtag #IndiaWantsCrypto has now become a key search term for opening the dialogue between people and state. Another hashtag of importance within the Indian crypto community is #IndiaCrypto. Both of these hashtags are related to helping people buy and sell cryptocurrency as they see fit.
As regulatory debate around letting people buy and sell cryptocurrency continues, both social media accounts and posts are only going to grow in number with key influencers in the space already becoming distinguished voices for calls to clarity as well as protest...
Is the future of crypto in India peer-to-peer (P2P?
India was an early adopter of Bitcoin, the first and foremost cryptocurrency to many which started it all. So much so that he RIB issued warnings as early as 2013 to Indian citizens on the risks of buying and selling cryptocurrency locally.
At the time of writing, however, clarity is remaining elusive for regulations and the status of buying and selling cryptocurrency is still not entirely clear.
If this indecisiveness continues to propagate, or if banking institutions continue to close bank accounts linked to buying or selling cryptocurrency, Indian Fintech companies and startups might have no other choice but to relocate operations temporarily out of the country and Indians who are at the forefront of cryptocurrency and innovation will need to continue to find new platforms to buy and sell their preferred crypto.
The relocation of innovative Indian companies would stifle years of progress and change, keeping the Indian people out of step with the rest of the world but not by their own choice.
In the meanwhile, many people in India have been moving towards peer-to-peer (P2P) trading (Otherwise known as OTC trading).
Centralized exchanges, such as Binance and Coinbase, are tied to the same banks that are rejecting cryptocurrency for their fiat deposits and withdrawals.
P2P trading doesn't have this problem as you are trading directly with other people which means payment can be made directly to the other person’s bank account without the P2P exchange acting as an intermediary like on centralized exchanges.
P2P trading also makes it more difficult for the banks to know that the buying or selling of Cryptocurrency has even taken place.
LocalCoinSwap P2P exchange is a natural place to help people buy and sell Bitcoin in India, or any of our other cryptocurrencies, either due to a difficulty of accessing centralized exchanges or simply because they prefer to buy and sell crytpocurrency privately or on a less centralised platform.
If you wish to learn more about LocalCoinSwap or even P2P trading, you can read our recent post how to make money with P2P trading article to find out more.
This article is an editorial opinion piece contributed by an LCS community member.