In April this year, the Reserve Bank of India (RBI) gave a three-month window to banks and other RBI-regulated entities to wind up existing relationships with firms or individuals dealing in cryptocurrencies. The restrictions came into effect on 7 July, in a big setback to the crypto market in India.
About a month ago, the crypto market experienced another blow, when one of the country’s oldest crypto exchange, Zebpay, announced on 27 September that it was shutting shop. Other exchanges and investors are now waiting for the Supreme Court to hear a petition, filed by some of the exchanges and the Internet and Mobile Association of India (IAMAI), which challenged the RBI’s 6 April circular prohibiting rupee-crypto trade. Though the final hearing was scheduled to be held in September, it got postponed.
Overall, the crypto industry seems to be in a shambles with trading volumes dipping at most exchanges despite the rise of peer-to-peer or P2P transactions and innovations by a few exchanges in a survival bid.
What happened to the companies?
As expected, there have been slumps in trading activity around the time of RBI’s announcement and when the ban came into affect.
Older exchanges with a longer history and data of transactions have a stark story to tell. Sathvik Vishwanath, co-founder and CEO of Unocoin, the crypto exchange that started in 2013, said the present volumes are less than 10% of the volumes three months ago.
Another exchange Koinex too has witnessed significant decline in trading volume. “At the peak in December 2017, we did around $265 million in trading volume in a 24-hour period. Right now it is about $1-2 million in a day,” said Rahul Raj, co-founder and CEO, Koinex.
“From August, we are seeing an uptick in the number of people signing up on the platform and transacting. We saw about 9,000 sign-ups last month alone, and most of these people are the ones who have never transacted in crypto before. Usually about 40-50% of the new sign-ups complete a trade after signing up,” said Nischal Shetty, founder and CEO of WazirX, an exchange that started operations in March this year, and introduced P2P transactions in July. WazirX claims to have monthly trading volumes of ₹35 crore as on September.
What are they trying to do to stay in the market?
While the volumes have clearly taken a massive hit, some exchanges are trying to keep the boat sailing. Two exchanges, WazirX and Koinex, have come up with P2P trading. A peer-to-peer (P2P) service is a decentralized platform whereby two individuals interact directly with each other, without inter-mediation by a third-party. Instead, the buyer and the seller transact directly with each other via the P2P service.
Now another exchange, Unocoin, has come up with another possible entry and exit solution for its customers. The exchange will be deploying kiosks like automated teller machines (ATMs) that will accept cash that will be reflected in the user’s rupee wallet on the exchange and can be used for purchase of cryptocurrency. Similarly, a user having a rupee balance in the crypto wallet can withdraw cash from the kiosk.
Are the companies at a loss?
There was some amount of panic selling at the time of RBI’s announcement and later when the ban came into effect. But the selling price is not depressed in India because the underlying asset is a global asset and the prevailing global price is determinant in the local price as well, Raj said.
“Suppose the prevalent global price of a BTC is $6000 and someone is desperate to sell, the person can sell at $5900. But usually, there is a premium on BTC prices in India. If the price globally is $6000, it is possible it could be sold at $6100 in India,” he added.
With the future of cryptocurrency not certain in India yet, new investors should stay away. Existing investors need to calculate their risks.