Demand for bitcoin grows in India despite unease from central bank
Interest in bitcoin is growing in India despite warnings from the central bank that the digital currency is a risky and unregulated investment.
Although the cryptocurrency is reputed for its volatility, it has gained appeal along with other virtual currencies after India’s demonetisation move in November last year.
“Bitcoin has seen a dream run in the last year,” said Vikram Pandya, the director of the fintech programme at S P Jain School of Management. “Like other countries, many people from India are attracted towards it with expectations of getting high returns in a quick time.”
Its surge last week came as speculators feared missing out on what is expected to be a watershed for the cryptocurrency today, when one of the world’s largest regulated exchanges begins futures trading of the digital currency.
“Unlike earlier times, rather than putting or investing their money in bank fixed deposits, saving policies, mutual funds and gold, they are becoming more aware about investing in bitcoin,” said Shivam Thakral, the co-founder and chief executive of BuyUcoin, a New Delhi platform for trading cryptocurrencies.
Bitcoin is now accepted by a growing number of retailers and other businesses in the country, such as restaurants, as cash liquidity has decreased following demonetisation, resulting in businesses moving towards alternative payment platforms.
Although the Indian government is trying to push Indians to move towards digital transactions to reduce the country’s heavy dependence on cash, which is hard to track and can make black money flows easier, it has not yet thrown its weight behind virtual currencies.
Arun Jaitley, India’s finance minister, recently said the government did not recognise virtual currencies as “legal tender”. He earlier highlighted that there are no regulations governing these currencies. The Reserve Bank of India on Tuesday issued its third warning to members of the public about the risks of investing in bitcoin and other virtual currencies.
It highlighted that it had not given “any licence or authorisation to any entity or company to operate such schemes or deal with bitcoin or any virtual currency”.
“In India there is no specific legal framework to govern the cryptoexchanges and hence they are self-regulated. No one is entirely sure how bitcoin will continue to spread to the larger financial world,” Mr Pandya said.
“With the widespread prevalence of cryptocurrencies like bitcoins and many others, central authorities like RBI are in a fix since they have no control on the generation and usage of such currencies directly,” Mr Thakral said.
“Since this technology is not in the control of central authorities, there are many Ponzi schemes prevalent in the market in the name of bitcoin. It has hence made it hard for the government to track and or stop them.”
Many companies in India now tap into the interest in bitcoin. One of these is Unocoin, based in Bangalore, which describes itself as India’s first entrant into the industry, operating the largest bitcoin-rupee trading platform in the country.
The start-up launched in 2013 and enables its more than 150,000 customers to buy, sell, store, use and accept bitcoin. In September last year, the company raised $1.5 million in investment from a consortium of investors, and it has outlined ambitions to expand globally.
Speculators have their eyes on bitcoin and while cryptocurrencies have strengths, they are not for widows and orphans