Overcoming the Crackdown as an Indian Digital Currency ExchangeOctober 20, 2018
The crackdown on cryptocurrencies in India is an ongoing process, but the story of a single cryptocurrency exchange operating in the country is an interesting showcase of innovation under dire regulatory circumstances. The company in question is Unocoin and the crackdown has forced it to begin experimenting with ATMs and stablecoins as a way of ensuring it can receive deposits from its clients.
The company was founded by Sunny Ray who stated that his business has not been able to attain transactions through regular banking channels for several months. This started when RBI (Reserve Bank of India) decided to ban any bank from working with crypto or companies related to cryptocurrencies in April. This move left 1.3 million Unocoin customers with access to their basic services.
However, Unocoin recently set up an ATM located in a Bangalore mall. Where customers can make deposits rupees to their exchange digital wallets without the use of a credit card or bank. The company plans to open additional ATMs in Delhi and Mumbai. Ray stated that Unocoin has been forced to employ ATM machines that are on the standard of any regular bank.
Right now, users are not just using ATMs but also transferring their local currency to TrueUSD tokens. These were launched by Unocoin back in August and they are based on ethereum’s platform. These are then used for buying bitcoin and other digital assets. The token is a stablecoin, which means that it was designed to maintain parity with the fiat USD.
Unocoin customers outside of Bangalore utilize stablecoins as a way to hold value on their Unocoin accounts that do not suffer from the level of volatility of the cryptocurrencies, even though they are not as stable as their fiat role models. In October, the transaction volume in TrueUSD or TUSD was still at only a few thousand each day. Ray stated that the company never considered making a stablecoin but now it resorted to using it out of necessity, even though he does not see it as a long-term solution.
Currently, the company is trying to figure out how to scale their ATM operation and stay compliant with all of the relevant regulations. Aside from that, the team is also looking for ways to expand internationally, mainly to Canada and Malta, in the case Indian operation become completely impossible. This is done in parallel with launching several more stablecoins.
The Indian Legal Status of Crypto
There is a legal battle raging in India which wants to overturn the ban that the government began. So far, it has not provided any results for the crypto community. At the same time, the ban is wreaking havoc on the same community and popular exchange companies like Zebpay have stopped their operation suddenly in the previous period. Crypto Kanoon co-founder Kashif Raza stated that the community is suffering and even individuals have experienced their bank accounts beings closed because of their dealing with crypto.
The severity of the crackdown has created a public image that the use of bitcoin is outlawed in India, but in reality, it only applies to the entities that are governed by RBI. He finished by saying that the regulatory push has not been laid out with any clarity and that all crypto companies still working are trying to develop multiple solutions, just like Unocoin has been doing.
Reasons to be Hopeful
The fallout from the crackdown does not imply that the crypto startups from India have switched to the black market. Instead, Raza stated that the process of opening a crypto exchange account often requires more KYC paperwork (know-your-customer) than the bureaucracy in the case of a regular Indian bank account.
Also, a lot individuals in the crypto community perceive the whole ordeal as a process of inconvinience, not a death sentence for the local industry. Overall, India is constantly underlying its commitment to making the country more tech-oriented, including the tech based on virtual currency. This is why the community is hoping that the relationship between banks and crypto ventures will be regulated and opened for business in the near future.
The same goes for the investors who are looking to keep supporting crypto ventures. For one of them, Blume Ventures, the idea of using ATMs is something they are very much in favor of. This way, the depositors of fiat currencies can be immediately known to any regulative body, as well as the precise ledger of any transactions.
The ban had the direct effect of invigorating the trading that goes on a peer-to-peer basis. One of the exchanges that work on this principle, the WarizX, reached a daily trading volume of 50 BTC in September. A global platform that uses the same principle reached $1.5 million in weekly trading volume coming from India several times since August.
Unocoin has also seen some advantages to the clampdown. In the days after Zebpay stopped working, they attained around 500 new users with registered accounts every day. In this domain, the issue of the state of traditional baking is fueling the willingness of individuals to move into crypto. While in most developed nations, cryptocurrencies are often tied to esports and similar new and trending online ventures, in India, many individuals just do not have access to traditional banking services.
Some of those who have it cannot get the ability to use the online banking features. Cash, however, is fully present in all aspects of life, but many people realize its shortcomings. By employing a digital currency, they can override these very effectively.
Indian Factor in the Struggle for Global Adoption
With one in seven people in the world living in India, the state of crypto is important for the entire global crypto community. Clearly, the government is trying to stem the flow of so-called black money and allow, hopefully, the nation to invest more in infrastructure projects of great significance.
But, the heavy-handed regulation is also destined to muffle the development of an industry that already directly helps many regular citizens. India’s government would be wise to recognize the difference and support crypto development and their platforms, while they do clamp down on tax avoiders and others like them in the country.