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Global digital currency exchanges are exploring ways to settle in India, following in the footsteps of market leader Binance, industry sources told Reuters, while the New Delhi government is reluctant to introduce a law that could ban cryptocurrencies.
Opponents of the potential ban say it would stifle the economic power of a young, tech-savvy nation of 1.35 billion people. There is no official data, but industry analysts estimate that there are 15 million crypto investors in India with more than 100 billion rupees ($ 1.37 billion).
According to four sources, who declined to be identified because they were not authorized to comment on the private talks, US-based Kraken, Hong Kong-based Bitfinex and its rival KuCoin are actively exploring the market, which the analysts, would only grow if given carte blanche. These companies have already started talks to better understand the Indian market and entry points, said a source directly involved in an exchange that had started due diligence for an Indian company it was considering acquiring.
The other two exchanges, he said, were in the early stages of deciding to enter India and weighing their options, which in effect amounts to choosing between setting up a subsidiary or buying an Indian company, like Binance did this two years ago.
Bitfinex declined to comment while Kraken and KuCoin did not respond to an email requesting comment.
All three exchanges are ranked in the top 10 worldwide by the data platform CoinMarketCap, based on their traffic, liquidity and the reliability of their reported trading volumes.
The Indian market is huge and it is only just starting to grow, if there had been more political certainty now Indian consumers would have been spoiled for choice in terms of trading as everyone wants to be here, said Kumar Gaurav, founder of digital bank Cashaa. .
Supporters of cryptocurrencies say it would be the most cost-effective way for Indians abroad to send funds home.
But authorities fear that the rich and the criminals are hiding their wealth in the digital world, and that speculative flows of funds through digital channels, not governed by India’s strict currency controls, could destabilize the financial system.
No rules
Until now, India did not have specific rules for cryptocurrency exchanges wishing to settle in the country. Instead, they could sign up as tech companies to get a relatively easy entry path.
In 2019, Binance acquired WazirX, an Indian cryptocurrency startup that allowed users to buy and sell crypto with rupees on the Binance Fiat gateway.
The American exchange Coinbase has announced its intention to create a back office in India.
But with the regulatory environment for cryptocurrencies deteriorating globally, Indian authorities are exercising increased scrutiny.
In China, authorities have banned banks and online payment companies from providing services related to cryptocurrency transactions.
And the Indian government was set to introduce a bill to parliament by March that proposed a ban on cryptocurrencies, making their trading and holding illegal. But the government withheld it, and conflicting statements have since fueled uncertainty over the fate of the bills.
Meanwhile, major Indian banks have started severing ties with exchanges and cryptocurrency traders, amid concerns from the Reserve Bank of India over financial stability risks posed by the volatile asset.
The RBI plans to launch its own digital currency, but Governor Shaktikanta Das in February described the plans as a work in progress.
Despite all the uncertainty over what India will end up doing, some digital currency exchanges clearly feel that it would be better to enter rather than run out.
It is clear that the rewards outweigh the perceived risks, which attract these global companies to the Indian market, said Darshan Bathija, CEO of Vauld, a foreign crypto exchange with a presence in India.
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