Bitcoins in India: Challenges and Opportunities Ahead

By October 28, 2020November 4th, 2020No Comments
Bitcoins in India- Challenges and Opportunities Ahead - WazirX

Digitalization has made it possible for the global population to deal with currencies that are not regulated by the government. Cryptocurrency carries its share of problems, which are lack of public trust, and susceptibility to fraud. Despite that, it has attained the green signal in countries around the world, each with a different regulatory framework governing its action. Things have not been a smooth run in India where the Central Bank issued a notification for impeding banks from undertaking Bitcoin transactions.

The Bitcoin Journey In India

The first Bitcoin exchange was launched in India in 2012 but it underwent a major surge in 2017. By October 2017, the price of 1 BTC became INR 295000. This was accompanied by a drastic rise in the user base of major Indian bitcoin exchanges like Unocoin and Zebpay. But the Reserve Bank Of India played it safe by sending cautionary messages against the use of this virtual cryptocurrency since 2013. The main concern surrounded the lack of any authority to look after its licensing and registration.

Another problem pertaining to Bitcoin is its extreme volatility. This led to the RBI terming the crypto market as a “Ponzi Scheme and an environmental disaster” in August 2018. The Bitcoin live price in India is approximately 975000 INR. RBI prohibited investors from exchanging it for INR from banks and other financial institutions. It has also placed a ban on financial institutions from offering their services to crypto businesses.

Amidst these issues, the Indian Supreme Court lifted the banking ban imposed on crypto exchanges. The BTC market in India has been experiencing a massive rise in peer-to-peer activity ever since then, it has even managed to exceed China. The blanket ban was deemed to be unconstitutional by the Indian Supreme Court as prohibiting tech was not a solution. Rather a risk-based framework needs to be put into place for monitoring the cryptos. Following the order by the Supreme Court, different crypto agencies around India made solid efforts of re-integrating INR support via bank accounts.

Opportunities Ahead For Bitcoins:

  • Bitcoin can be used in the legal services field for systematizing specific obligations like contractual payment duties. Automating these payments for self-execution after certain contractual obligations have been fulfilled can simplify the whole process. This can reduce the time spent on compliance directives and monitoring of resources. 
  • The real estate sector is handicapped by red-tapism which makes even the simplest of processes highly time-consuming. But the decentralized nature of blockchain can do away with the requirement of middlemen and other verification requirements for regulatory compliance. 
  • The providers of wholesale insurance stand highly benefited by the applications of blockchain in the insurance sector. Different procedures of processing of claims and KYC regulatory compliance can be streamlined. Deloitte has projected smart contracts that can pave the path for a smooth workflow and seamless error checking. The reach of micro-insurance can also be enhanced in this way by facilitating micro-payments on the basis of data availability. 
  • Bitcoins can provide the perfect solution to rights management and revenue sharing of intellectual property. This is the reason behind its massive popularity amongst gaming companies trading in gaming content.
  • Users can opt for bitcoins in making small payments and disbursing other health-related payments automatically. This helps to streamline the healthcare process of patients during times of crisis.

Bitcoin completely eliminates the role of third parties which might otherwise make the transactions a highly risky affair. The low transaction fee of bitcoins further adds to its lucrativeness as the fee you pay is directly proportional to the amount of money transferred online. Usage of bitcoin requires zero paper verification and also allows payment through mobile wallets.

Challenges Of Bitcoins

  • Bitcoin is immensely affected by high price volatility. One day it might be worth thousands and the other day it might hit a record low level. This volatility makes it difficult for investors to park their funds while aiming to buy Bitcoin in India
  • Speculating in Bitcoin is also very cumbersome as it is not affected by normal factors which influence other banks. 
  • Bitcoin mining consumes a lot of energy and miners mostly rely on non-renewable sources. This adversely affects the environment in the long run.
  • The crypto world keeps on evolving continuously and Bitcoin might lose its position if a new contender comes in to take its spot in the upcoming years. Bitcoin’s value in the trading market can get adversely affected following the development of other superior currencies. 
  • Cryptocurrency market has been linked time and again with black market transactions and this has severely damaged the image of bitcoin trading. Scammers often take advantage of the lack of any governing body and this can lead to massive losses for the investors.

Recent Developments In Crypto Sphere

An inter-disciplinary committee was formed by the SBI, RBI, and NITI Aayog in collaboration with the Secretary of Department of Economic Affairs. The Indian government has thoroughly encouraged the utilization of various technological benefits while cautioning against the potential grey areas.

Final Words

Antipathy towards central regulation and authority has led to the birth of Bitcoin. It gained initial popularity, given the anonymous nature of the transaction but this also drew the attention of governing authorities and financial regulators. RBI has made it evident from the very beginning that the lack of trust and fear of the unknown is its biggest concern. The Central Bank has not explored the probability of fraud in any of its documents although chances of fraud cannot be eliminated even with traditional money. However, regulation can minimize the risk and the same needs to be implemented in India for the effective development of this virtual currency. One of the biggest questions concerning the Indian population is the outcome of imparting legal status to Bitcoins. Whatever be the result, Indian citizens have been advised by the RBI to keep vigil while entering into crypto transactions using Bitcoins.

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