However, reviving a legitimate cryptocurrency market in India could take time and effort, say the founders, as there are both regulatory challenges and the global bitcoin crisis to deal with.
Payment gateways
The first practical problem for crypto exchanges in India is payment networks. In April 2018, the RBI banned banks from supporting payments to cryptocurrencies. To survive, exchanges had to come with alternative methods like peer-to-peer payments, which were risky. In the absence of an RBI circular, it is not possible for crypto exchanges to set up an online payment facility on their websites. For online payments via NEFT, RTGS or UPI, exchanges would need the help of banks and payment facilitators like PayU, BillDesk, Instamojo and Razorpay. “We will have to develop systems because the interest is enormous. We see thousands of users invading our platform, “said Sathvik Viswanath, founder of Unocoin, which has an active commercial base of 3 lakh customers and claims to have a total customer base of 1.3 million.
Another problem would be that, even if the RBI gives its approval, investors and big banks like the State Bank of India could remain sidelined if the government and the finance ministry remained skeptical.
Different cryptos, a challenge for the regulator
There are 1,658 cryptocurrencies in the world, of which the Indian stock exchanges offer 70 to 80. But they vary in kind as some are currencies, some assets, some securities, some commodity derivatives and some are tokens used in a closed loop system. Since the nature of each cryptocurrency is different, regulation could be a nightmare, RBI officials said. “Does it fall under the RBI?” Under Sebi? There are even telecommunications companies around the world that use token cryptos for closed-loop payments. Does it fall under Trai when it is a token and not a currency? So given the chameleon nature of cryptos, it’s a regulatory nightmare, ”said an RBI official.
The path to self-government
The microfinance industry in the 2000s developed by leaps and bounds with little regulatory control, until the massive Andhra crisis of 2009 put it on the path to self-regulation with the formation of the network of microfinance institutions (MFIN).
Likewise, the country’s crypto exchanges and the Internet and Mobile Association of India (IAMAI) – which was the SC petitioner – are seriously considering self-government. “We realize that a bad actor can really mess things up for all of us. It would take a single bad decision, a single scam for the government to really crack down on us, “said Nischal Shetty, CEO of WazirX, which has 2.5 lakh customers.
Take Amit Bhardwaj’s Bitcoin scam in 2018 – thousands of Indians lost nearly Rs 2,000 crore. Or, the Bitcoin Rs 485 crore scam where the kingpin Abdul Shakoor was murdered in Dehradun. Even in a country like Japan, where cryptocurrencies have been legalized and encouraged by the government, there are scams like BITPoint, where customers lost $ 28 million in July 2019.
There is another huge problem of terrorism and possible abuse by fraudsters and scammers. Consequently, in order to prevent illegal activities and their possible use for terrorist purposes, the exchanges intend to carry out rigorous KYC controls.
What about redressing customer complaints?
If customers lose money at an ATM or online scam, there is the bank, the bank mediator, the RBI and the consumer courts to appeal. The emerging cryptocurrency space also needs an appropriate grievance redress mechanism to gain the trust of customers.