Blockchain technology is all about removing the intermediary and today banks are intermediaries for all transactions.
As of January 1 2021, Bitcoin was trading as high as Rs 23,61,651. In the period between January 2020 to December 2020, the crypto currency grew 317.2%, according to YCharts. Bitcoin has proven to be safe, trustworthy and a viable mode of transaction globally. While cryptocurrency mining is a separate business of a large technical scale altogether, trading cryptocurrencies is what is relevant to the masses. This has led to the rise of a number of crypto exchanges across the world and in India. Some of the top crypto companies in the Bay area have also invested in the exchanges in India.
“Since the lockdown began in 2020, volume of crypto trading in India grew drastically. By the end of December 2020, $60-65 million worth of Bitcoin trades were happening in the Indian region on an average, everyday,” says Monark Modi, founder and CEO, Bitex Technologies.
According to Modi, the market capitalisation of a cryptocurrency is mostly dependent on the fund rotation that happens within a region. “Previously there were people who were simply possessing Bitcoins or other cryptos, doing very few trades. But since March 2020 when there was a global boom, there was a 12% jump in the number of trades that took place in India,” he says.
Anyone who has an account with the exchanges can buy, sell or hold cryptocurrencies. The tech platforms match buyers and sellers depending on the quantity and the prices during the day. “Similar to a bank, there are interest rates for customers who are holding their currencies on our platform,” says Modi. “We charge them 0.1-0.2% of a transaction or make it free based on the nature of transactions.” Given the growth, crypto exchanges in India are preparing to on-board more traders. “There is a need today to create awareness among the public. We make available all the educational material on cryptocurrencies to traders for free. This is fairly a new concept and so we aim to educate our customers on blockchain and crypto-trading,” says Sumit Gupta, CEO and co-founder, CoinDCX.
He believes the news of Bitcoin boom in the last eight months of 2020 globally was a major reason for people to get interested in crypto trading. “And obviously they want to venture into this space and know everything before they do. As an exchange we have to make the user experience as simple as conventional share trading and also enable them to understand that cryptocurrencies represent different forms of assets for different purposes,” he says.
There are several reasons why in 2020 there was a Bitcoin boom. According to Ganesh Vasudevan, research director, IDC Financial Insights, there are three key components to measure the growth of any cryptocurrency. “Economic factors, technology and regulator intervention are three checks a cryptocurrency should cross before it sees a boom. Bitcoin has passed all these three since its introduction in 2009,” he says. “The successful current rally the Bitcoin is having is due to large institutional investors jumping into this space, showing more trust in the underlying blockchain technology during the times of uncertainty,” he says.
According to him, after a threshold point regulators are bound to step in. “When cryptocurrencies become sovereign currencies, when people could use them as a funding source, regulators will come out of the interim regulations and adopt policy level changes. It’s unlikely to happen in the short term, at least, in India,” he says.
The Reserve Bank of India (RBI) is expected to levy 18% GST on crypto-trades happening currently. Central banks globally are experimenting with Central Bank Digital Currency or CBDC, a new type of currency that can leverage blockchain technology. Given the volume of transactions happening already, taxes on crypto-trading open up a new revenue channel for the government.
However, fiat currencies are here to stay for a long time. Blockchain technology is all about removing the intermediary and today banks are intermediaries for all transactions. “Central banks have just started figuring out blockchain. Fiat currencies will remain for a long time. RBI has to see how it can delegate new digital policies and regulations to other banks to make them relevant when cryptocurrencies become sovereign,” says Vasudevan. Crypto exchanges look forward to these regulations as it will clear their path to operate freely.
Copyright @ 2021 Financial Express
