A shift from peer-to-peer to exchange-administered payments has cemented a sharp rise in cryptocurrency trading in India since March.
The Supreme Court invalidated a Reserve Bank of India (RBI) ban on crypto payments on March 5, allowing banks to do business with crypto exchanges. These exchanges resumed rupee transactions, allowing their customers to convert rupees to cryptocurrencies and vice versa.
The rebound in exchange trading has been accompanied by a thaw in mainstream responses to cryptocurrency. Earlier this month, in an interview with CNBC, former RBI governor Raghuram Rajan said cryptocurrencies could play a role in a world in which central banks issue their own cryptocurrencies. On August 24, the International Monetary Fund released an educational video on cryptocurrencies.
Crypto trading took a huge hit when RBI banned crypto-related payments in 2018. Banks stopped providing services to exchanges, preventing them from banking transfers in rupees. This impacted the crucial first and last leg of cryptocurrency investments in which a trader invests in rupees and books profits in rupees. Exchanges responded by shifting focus to crypto-to-crypto trading and some exchanges like Zebpay moved out of India altogether. However, crypto exchanges also devised peer-to-peer systems to get around this problem, in which users connected through an exchange but paid each other directly. But these were clunky and did not inspire much trust.
“It takes time to add beneficiaries and transfer money to peoples’ bank accounts. This can be anywhere from 30 minutes to several hours. Most people don’t have the patience to trade like this. Volumes fell 90% when the RBI payments ban came into effect in August 2018,” said Arjun Vijay, co-founder and chief operating officer of Chennai-based Giottus Cryptocurrency exchange.
There is also an element of trust involved in disclosing bank account details to third parties and making transfers to unknown accounts.
To be sure, a draft bill banning crypto trading and criminalising even possession of cryptocurrency continues to cast a shadow over the industry. However, as the government dithers between a complete ban and a softer regulatory system, more and more ordinary Indians are taking to crypto trading. After crashing to around ₹3.65 lakh per piece in March, bitcoin has surged 2.4 times to Rs 8.4 lakh apiece now.