Indian crypto market picking up activity on cues of a global rally
There’s a massive rally happening in the crypto world. A bitcoin, the world’s most popular digital currency, is currently priced at Rs 14 lakh – up from around Rs 9 lakh a month back. Besides Bitcoins, other crypto currencies such as Etherium and Ripple are also on an upside.
A bitcoin rally is nothing new. There was one in 2017, which was followed by a massive crash in the global crypto market, mainly driven by speculative news of a ban in multiple geographies and hackers attacking crypto exchanges and stealing millions of dollars worth of bitcoins.
In India, the crypto industry suffered a crippling blow after the Reserve Bank of India asked banks to stay away from working with these exchanges in 2018. Further, with the global sell-off already in full steam, Indian traders also mostly exited their positions on these platforms or went into hibernation with their holdings.
However, industry insiders say that this time things seem to be somewhat different, in that it’s not retail traders who are driving the rally – rather institutional players are buying in.
“This time the rally is being driven by hedge funds in the United States who are buying this as an alternate asset class for the long term,” said Sathvik Vishwanath, co-founder of Bengaluru-based crypto exchange platform Unocoin.
With large institutions buying into crypto, there is a shortfall happening in the global crypto availability, which is fuelling the rally, he added.
Multiple global commentary on the rally has pointed towards this same trend.
Indian crypto traders say the entry of American digital payments major PayPal into this space could become a landmark in the crypto world, as it brings stability and validation to the crypto trading business. PayPal chief executive Dan Schulman went on record recently to talk about the multiple utilities of crypto currency where consumers can start using it for much more than just as an asset.
Other large players including banking giant JP Morgan have spoken positively about bitcoins, and even American payments startup Square spoke about investing in bitcoins, all leading to a flood of positive news around the sector.
Overall, it seems that the buzz around crypto which was only growing louder through the pandemic has attained a shrill note and there is resultant heightened activity in the space.
The Indian Crypto Market
Any buzz in the global space and such a massive rally, inadvertently leads to frantic buying and selling of crypto in India too. There are multiple crypto exchanges in the country like CoinDCX, Unocoin, WazirX and so many others. Indian traders can open digital wallets with these platforms, using ‘INR’ to buy Etherium, Bitcoin or other crypto currencies and then on trade them on these exchanges
Moneycontrol spoke with a few of the founders of these crypto exchanges and crypto enthusiasts to figure out what socia media channels built for discussions on crypto are abuzz with. There are queries flooding in, many want to know if this will be a sustainable rally or will it lead to another major crash like the one in 2017.
Nischal Shetty, founder of WazirX, said many traders are reaching out to him to understand if they should hold or sell their crypto holdings.
“Many people had bought into this space in 2017, excited by the buzz, now they have an opportunity to sell, many are asking if they should hold on or sell now,” he said.
Overall crypto activity which picked up post the Supreme Court judgement in March 2020, is yet to see an explosion in India, industry insiders pointed out. The apex court had overturned the RBI’s decision to bar banks from dealing with crypto businesses, thereby getting exchanges back in business. Multiple new exchanges have also sprung up over the last few months.
Vishwanath of Unocoin said that may be the number of new users joining the platforms everyday has jumped to 100 from 10, but this number ideally should be much higher.
“Many are still in the wait and watch mode because of the regulatory issues,” he said.
While there are no official figures available, market estimates suggest that daily trading value in the crypto space could be around Rs 20 to 30 crore. Most of the traders are in the age group of 20 to 40 years with more than 85% being male.
Globally, bitcoin currently has a market cap of $357 billion while for Etherium it is $68 billion.
Regulations on crypto currency
Indian regulators have been extremely harsh on crypto trading platforms. While the RBI outright asked banks to stay away from dealing with crypto exchanges, the central government, time and again has spoken about crypto in a negative light. Within policy circles private crypto currency has always been looked upon with suspicion.
In fact many crypto enthusiasts have tried to promote bitcoins almost like digital gold, an asset to be invested in and for trading, and not to be used for buying goods and services.
“I have been pushing hard for the need for regulations around cryptocurrency, but as of now nothing much has moved,” said Shetty of WazirX.
Now the sense in the market is that with the United States softening its stand towards crypto and the South East Asian economies opening up too, the possibilities of a blanket ban in India which is deeply connected with these geographies, seems difficult. But no one is keen on taking a risky bet here and prefer to wait and watch.
While there is no blanket ban in the country and trading in crypto currency is not illegal, there is often speculative news in the press around a ban being planned by the government. Further, a draft bill is pending in Parliament that recommends a blanket ban on crypto mining, owning and trading. However, nothing has moved in policy circles, and the industry currently operates in an unregulated manner.
From small-time traders to tech geeks, crypto sees participation from all types of consumers. Industry insiders pointed out that even now, the current rally is seeing people from different backgrounds. One top executive at an exchange pointed out that there are many small-time traders who invest a few thousands on the platform and there are also investors who buy bitcoins worth a few lakhs in one go.
“I have bought into bitcoins in an attempt to spread out my risks, just like I have invested in mutual funds, fixed income options and many others,” said a founder of a financial services startup on the condition of anonymity.
The industry also wants people who understand the underlying technology behind distributed ledger and virtual currencies to foray into the space, since they can be the true evangelists and go ‘long’ on crypto. Speculative traders want to buy into the rally and sell at the slightest hint of a ‘ban’ or a ‘crash’ in this space, which hurts the ecosystem.
“This time the quality of traders has improved, the chatter on social media circles seems to be very different, also people now are more informed, many have already experienced the 2017 crash,” said Shetty.
But ask any trader or entrepreneur in this space if this time the rally looks more sustainable, the answer is always filled with trepidation. One of the founders of an exchange platform pointed out that there is too much uncertainty in the global financial world, no one can say for sure which way the wind will blow.
Judge rejects motion to freeze Cred’s crypto assets in bankruptcy case
U.S. Bankruptcy Judge John Dorsey has denied an emergency motion filed by 15 customers of the embattled crypto lending firm Cred Inc. to freeze crypto assets held by the firm on exchanges amid its Chapter 11 bankruptcy proceedings.
More than one dozen of Cred’s creditors filed the emergency motion on Nov. 23, seeking to compel 21 cryptocurrency exchanges to freeze assets held by Cred on their respective platforms, including five U.S.-based exchanges.
During a Nov. 25 hearing, Dorsey asserted that he could not act on the motion without evidence surrounding the status and ownership of the crypto assets in question, and scolded the investors for their apparent lack of effort put towards tracking down the assets:
“At this point, all I have is the obligation of the debtors to exercise their fiduciary duty to protect the assets of the estate […] all I can do is admonish the debtors.”
However, the judge noted that issues concerning the freezing of Cred’s assets are likely to be deliberated during the Dec. 9 hearing regarding a Nov. 18 motion from two Cred users requesting the case be converted to liquidation proceedings.
The Nov. 18 filing accuses Cred of operating an “unlicensed hedge fund […] rife with fraud and deception on ‘Madoff’ level proportions,” estimating that Cred’s liquid assets are equal to just 10% of its $136.5 million in liabilities.
Cred filed for bankruptcy on Nov. 7, with Cred describing the move as an attempt “to maximize the value of its platform for its creditors.”
A Nov. 8 declaration from its co-founder and CEO Daniel Schatt claimed that Cred’s former chief capital officer, James Alexander, had absconded with $3 million in Bitcoin belonging to its users in July of this year. Schatt also said that 800 Bitcoin worth more than $10 million had been stolen from the company by an imposter hired by its debtors.
The bankruptcy filing came less than two weeks after announcing a temporary suspension of operations.
Crypto.Com Gets Malta Financial Services Authority License
Crypto app and exchange Crypto.com recently announced that it received regulatory approvals in Malta. The company now has a Class 3 Virtual Financial Assets (VFA) license from Malta Financial Services Authority (MFSA).
According to Crypto.com, it has become one of the first crypto companies to get regulatory approval in Malta. The island nation approved a new set of crypto laws in 2018 to regulate the market which helps in bringing crypto platforms under the MFSA with a clear regulatory framework. Now that Crypto.com has a Financial Institution License, the company can provide payment services and also issue electronic money. The Class 3 VFA license will allow it to provide custody services, order execution, and account dealing for both professional and retail investors.
Co-founder and CEO of the platform Kris Marszalek said,
“We have a long-standing commitment to building a fully regulated business in every market we operate in. Being one of the first cryptocurrency platforms to receive in-principle approval for a Class 3 VFA License and a Financial Institution License is an important milestone and we look forward to securing licenses in more markets throughout 2021.”
The company is trying to get a competitive edge in Europe with new regulatory approvals. Malta, which aimed to become the ‘Blockchain Island’ is also opening up to international platforms. Some of the leading crypto exchanges in the world are now moving to Malta to gain from their regulatory offerings. The European country’s new laws are helping it become an important destination for blockchain and crypto firms looking for friendlier regulations.
Maltese authorities also announced earlier this year that they will be working on substantial measures that could help it usher towards a digital economy. These measures will also include the regulation of crypto platforms. The authority received “Letters of Intent” from as many as 34 crypto companies from around the world, including 21 crypto exchanges.
Spy Chief Warns Of China’s Crypto Influence
Does China have too much sway over digital currency?
That, apparently, is a concern of the outgoing Trump Administration’s spy chief, with Director of National Intelligence John Ratcliffe warning, in a letter obtained by the Washington Examiner, of Beijing’s growing influence and power in the cryptocurrency sector.
In the letter, addressed to Securities and Exchange Commission (SEC) Chairman Jay Clayton, Ratcliffe said China is now home to over half of the world’s cryptocurrency mining operations and that Beijing is weighing plans for an official digital currency that could box out U.S.-based innovators and entrepreneurs, according to the newspaper.
And Ratcliffe has found an influential congressional ally, having attached a copy of a letter by Sen. Tom Cotton (R-Ark.) that expresses similar concerns.
Cotton has previously pushed the SEC to step up its involvement in overseeing the cryptocurrency sector with an eye toward creating a more level, or more favorable, playing field for U.S. competitors.
The SEC needs to “develop a clearer articulation of policy and, ultimately, formal Commission guidance addressing digital currencies” Cotton noted in a 2018 letter, the Washington Examiner said.
Cotton escalated his warning in another, follow-up letter in July, to national security adviser Robert O’Brien, with a particularly barbed warning about “Chinese-controlled Bitcoin and Ether.”
“So far the Commission has concluded that only two digital assets should be considered non-securities — Chinese-controlled Bitcoin and Ether,” Cotton wrote, according to the Washington Examiner.
“The continued lack of regulatory clarity not only hurts U.S.-developed digital assets, it puts American national and economic security gravely at risk,” Cotton wrote.
The letter by the U.S. spy chief — and Cotton’s missives — come on the heels of an executive order President Trump issued earlier this month barring transactions between individuals and companies in the U.S. with a host of companies tied to the China’s People’s Liberation Army.
There is a possibility the Trump Administration might try to extend or interpret the order as covering “Chinese-linked digital currency companies,” the Washington Examiner reports.