If you would’ve asked us about bitcoins a year ago, many of us would’ve answered that it’s a decentralised currency maintained via a public ledger system. Cut to the present, that technical definition is flagrantly inadequate in explaining the significance of bitcoin, or cryptocurrency for that matter. To give you a sense of the current situation, today Bitcoin is valued at ₹1.75 lacs. That is, one bitcoin can get you an Acer Predator 17 OR a Digit High-End Gaming Rig (and still have about enough to buy a Samsung Galaxy S8 Plus). To put that number into context, roughly five years ago one bitcoin wouldn’t even buy you a Raspberry Pi.
And this is not just a broad view of the entire world – the scenario in India is picking up pace too. There has a been a rapid rate of growth in cryptocurrency transaction, as well as the number of startups that are involved in it. According to Dr. Chitral Patel, Growth Officer, Zebpay, India has witnessed a 250% growth in bitcoin userbase post demonetisation. In fact, their very own bitcoin wallet app, Zebpay, has reportedly crossed 500,000 users and is adding about 4,500 new ones every day. All of this is bringing a distinct change in India’s perception towards bitcoin.
“Currently there are more than 10 lakhs Indian citizens who are aware of cryptocurrency and (are) involve(d) in bitcoin trading.”, says Mr. Hesham Rehman- CO-Founder &CEO, Bitxoxo, “In next 2-3 years this figure will reach nearly 10-15 million users. In view of these surging numbers of users, the Indian Government established a committee to look into ways of regulating the trading of Bitcoins and other cryptocurrencies in the country. These developments substantiate the growth of Bitcoin usage in India.”
Even if there has been a lack of strong initiative from the government, startups have taken it upon themselves to set up the administrative infrastructure that the cryptocurrency market in India needs. Startups Zebpay, Unocoin, Coinsecure, Bitxoxo and SearchTrade have joined hands to form Digital Asset and Blockchain Foundation of India (DABFI) – an organising body to form regulations for the nascent industry. Their aim is to develop norms for trading of bitcoins and other blockchain-based digital assets.
Along with the regulatory goals, the organisation will also look at popularising the concept of cryptocurrency among the general populace. A common perception regarding cryptocurrency is that it is not entirely legal, either in India or globally, which is wrong. It is true that cryptocurrency can be (and is) used for a bunch of malicious purposes due to its untraceability. One just needs to have a look at the recent bout of ransomware attacks to get a feel of how popular this type of currency is among the criminal circles. But hindering technology with the objective of hindering the bad players using that technology was never the right way to solve anything.
They have also organised a campaign on change.org that has gathered sufficient traction. The aim of this campaign is to petition Mr. Arun Jaitley, Finance Minister, GOI; Mr. Urjit Patel, Governor, RBI and Mr. S Selvakumar, Joint Secretary, Ministry of Finance to officially declare bitcoin and other cryptocurrencies as legal tender in India. The petition has a target of 15000 signatures, and at the time of writing this article, required only about 300 more in a short span of 3 months.
It is not clear how influential this petition was, but the Government of India has taken notice of the rising conversation around cryptocurrency. The government is currently taking your comments on virtual/cryptocurrencies and whether or not they should be regulated.
What can you do with it?
One of the main reasons why people jump onto the cryptocurrency bandwagon is to trade in it. That is why one of the main services that these startups offer is trading. Apps from startups like Zebpay and Unocoin allow you to buy and sell bitcoins directly from them. Or you can also setup bids and requests to trade with the community (in Zebpay).
Apart from that, these apps also offer other services. For instance, Zebpay allows you to use the bitcoin balance on its wallet to perform mobile recharges, pay bills or buy vouchers from popular retailers like Amazon, Flipkart, Makemytrip and more. Check out Unocoin.com to find a list of merchants that Unocoin has partnered with for bitcoin payments.
Offline adoption of bitcoin and cryptocurrencies, in general, has been slow in India. Unocoin and other bitcoin wallets have been trying to drive it, but the general perception is yet to change.
The lack of regulations in India in the cryptocurrency arena has impacts on both side of the spectrum. Like any unregulated sector, cryptocurrency currently has very vague limitations on what can be done with it. And that leads to the impression that cryptocurrency is illegal in the country. As a consequence, general adoption is low.
On the other hand, the lack of regulations leads to the opportunity for the industry to self-regulate itself. And any industry effectively self-regulating itself in its initial days leads to optimal growth for the industry. That is exactly what the DABFI has been set up to do.
Another point where cryptocurrency faces an obstacle, as a currency, is the lack of a centralised exchange. This leads to multiple exchanges and trade engines which operate on their own technical specifications and hence, different rate of updating the exchange rates. Even if we go by the assumption that the rate of exchange is updated at the same rate across these discrete exchanges, a centralised exchange would be able to give a single comprehensive picture of cryptocurrency trade.
At the moment, even interested users of cryptocurrency face the problem of lack of liquidation. Investment in cryptocurrency in India is difficult to liquidate due to the lack of assets that can be obtained with cryptocurrency. In fact, the only significant way one can make a gain using cryptocurrency is on exchanges. Due to these factors, as explained by Dr. Srikant Sundarajan, Partner – Ventureast, venture capitalist sentiment is not entirely in the favour of cryptocurrency startups at the moment.
Is it worth it?
Cryptocurrency right now, is a risk. Stories of people minting money overnight can influence anyone into believing that cryptocurrency is the way forward. Which it is, but not on the road to make easy money. If you look at the price rates of cryptocurrency, be it bitcoin or ethereum, the volatility clearly indicates that it is not a wise decision to invest in cryptocurrency if you do not understand the way the market works.
On the other hand, from a technology point of view, cryptocurrency in India would pose no additional threats that paper currency and wire transfers don’t already pose. Hence, the efforts of these startups into popularising cryptocurrency, and the subsequent legislation that is being worked on as we speak, might open a new dimension of payments and transactions in India.
This article was first published in the July 2017 issue of Digit magazine. To read Digit’s articles first, subscribe here or download the Digit app for Android and iOS. You could also buy Digit’s previous issues here.