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 told about the introduction of 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 are no official data, but industry analysts believe that there are 15 million crypto investors in India holding more than 100 billion rupees ($ 1.37 billion).
According to four sources, who declined to be identified because they were not allowed to comment on private discussions, US-based Kraken, Hong Kong-based Bitfinex and rival KuCoin are actively seeking the market, which analysts say will become greater only if he was given a free reign. “These companies have already started talking to better understand the Indian market and entry points,” said a source directly involved with an exchange that had initiated due diligence for an Indian company that was planning to acquire.
The other two exchanges, he said, were in the early stages of the decision to enter India and weigh their options, which effectively comes down to a choice between setting up a company or acquiring an Indian company, as Binance did two years ago.
Bitfinex declined to comment while Kraken and KuCoin did not respond to an email seeking comment.
All three exchanges are ranked in the top 10 in the world by the data platform CoinMarketCap, based on their traffic, liquidity and reliability of their reported trading volumes.
“The Indian market is huge and is just starting to grow, if there was more policy certainty by now, Indian consumers would be spoiled for choice in terms of exchanges because everyone wants to be here,” said Kumar Gaurav, founder of digital bank Cashaa.
Proponents of cryptocurrency say they would be the most cost-effective way for Indians abroad to remit funds at home.
But authorities worry that rich people and criminals could hide their wealth in the digital world, and speculative flows of funds through digital channels, ungovernable by India’s strict exchange controls, could destabilize the financial system.
So far, India has not had rules specifically for cryptocurrency exchanges that want to settle in the country. Instead, they could register as technology companies to gain a relatively easy entry point.
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 US-based exchange, Coinbase, has announced plans for a back-office in India.
But with the regulatory environment for cryptocurrencies taking a turn for the worse around the globe, Indian authorities are exercising greater scrutiny.
In China, authorities have banned online banks and payment companies from providing services related to cryptocurrency transactions.
And the Indian government had to present a bill to Parliament from March proposing a ban on cryptocurrencies, making trade and holding them illegal. But the government withheld it, and conflicting statements fueled uncertainty over the fate of the project.
Meanwhile, major Indian banks have begun to break ties with cryptocurrency exchanges and traders, amid concerns by the Reserve Bank of India regarding the risks of financial stability posed by volatile activity.
The RBI is trying to launch its own digital currency, but Governor Shaktikanta Das in February described those plans as “work in progress”.
Despite all the uncertainty about what India will end up doing, some digital currency exchanges clearly calculate that it would be better to enter rather than fail.
“It is clear that the benefits outweigh the perceived risks, which attracts these global companies to the Indian market,” said Darshan Bathija, chief executive of Vauld, a foreign crypto exchange that has a presence in India.