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By Andy Mukherjee
With the speed that cryptocurrency is emerging as an alternative asset of choice for the Millennial generation in India, it’s hard to imagine that just two years ago a couple of blockchain pioneers were briefly in police custody.
Sathvik Vishwanath and Harish BV, co-founders of a five-year-old startup, were arrested in late 2018. No, they didn’t come up with a shady initial coin offering. Their “crime” was setting up a kiosk in a shopping mall in Bangalore where customers could exchange Bitcoin, Ether or Ripple for money or vice versa. This was the whole point of Unocoin, their crypto token exchange. But the police were suspicious of the new “ATM”
Much has changed since then. Unocoin, which has just raised funding from Draper Associates, Tesla Inc backer Tim Draper, is thriving, along with other Indian blockchain initiatives. India’s share of person-to-person virtual currency trading in Asia has increased to 33%, the same as in China, according to volume analysis by Oslo’s Arcane Research on Paxful and LocalBitcoins, the largest trading platforms. transactions in the region.
Some of these are undoubtedly due to Bitcoin’s bubbling rise this year, which recently hit $ 100 from its all-time high after surpassing $ 19,000 for the first time since 2017. Even after Thursday’s swing, prices they have even more than doubled this year.
Also Read – Crypto Boom Is Rocked As Bitcoin Plunges Along With Other Coins
But fundamental factors are also at play. Sending money to India in tokenized form, thus avoiding heavy bank fees, is becoming an option. Some digital asset exchange clients, possibly tech-savvy freelancers, receive tokens at regular intervals as payment for their work and convert them to rupees via their local bank accounts. Families in India use the same channel to send money to students abroad.
Having the largest diaspora in the world – and more than $ 100 billion in two-way cash flows last year – isn’t the only thing. Prime Minister Narendra Modi’s disastrous ban on 86% of the country’s currency in November 2016 shook Indians’ faith in fiat money. Add the fear of leaving bank reserve liquidity when three major deposit-taking institutions collapsed in the past 15 months. No wonder Arcane expects Indian crypto volumes to exceed those of China.
The national wealth management sector is also helping the adoption of cryptocurrencies, thanks to its incompetence. Most large-cap fund managers have struggled to beat their benchmarks, especially in recent years. The Nifty 50 index has only returned about 2% annually in dollar terms over the past decade. However, as Bloomberg Intelligence’s Gaurav Patankar and Morgan Barna demonstrated, the lack of performance hasn’t stopped managers from pocketing high fees.
Disgruntled younger savers are taking notice and dipping their toes into US exchange-traded funds. At 1%, the international allocation is still small, Bloomberg Intelligence analysts say, but it is growing rapidly. Ditto for cryptocurrency investments, although holding a highly volatile digital asset for the long term is not for the faint of heart. Only 600 of Unocoin’s 1.2 million customers have initiated a systematic purchase plan to invest (mainly) in Bitcoin. But 99.5% of them are sitting on profit and have to brag about it to their friends.
Also Read – Explained: What are stablecoins?
There is a damper – adjustment. Nobody wants a return to 2018, when the Reserve Bank, the monetary authority, ordered banks not to entertain clients who traded in virtual currency. The draconian approach has nearly strangled the Indian blockchain revolution. The action against the Unocoin kiosk in Bangalore was like the heavy hand of the state crashing into a children’s lemonade stand. If people in India’s tech capital couldn’t pay cash to buy digital tokens, the asset was effectively banned nationwide.
In hindsight, the founders’ ordeal with the police turned out to be a blessing in disguise. Young entrepreneurs got together, went to the New Delhi Supreme Court and got the RBI’s leadership for the banks declared unconstitutional. It was March. The exchange has already seen a fivefold jump in trading, averaging $ 150,000 per day, from $ 30,000 before the court verdict. Trading has been much higher recently, thanks to the rise in Bitcoin prices. Larger exchanges like CoinDCX were seeing nearly $ 700,000 daily volumes when I last checked.
Gamers are urging the government to bring digital assets under the existing money laundering law, which will give the industry legitimacy. The next step would be to regulate the tokens as money or securities, depending on their use.
The phlegmatic Indian bureaucracy might wonder if this is all a mania. Maybe not. Nor is it exclusive to Indian Millennial and Generation Z consumers. Wringing the global banking sector from its exorbitant fees and putting more purchasing power in people’s hands after the Covid-19 pandemic will be a global goal. In their study titled “What We Must Do to Rebuild”, economists at Deutsche Bank AG are advising companies and policymakers to design alternatives to credit cards and to “remove middleman fees.” In the short term, conventional fintech will help, but in the long run all major economies will do so by replacing cash with their own central bank digital currencies.
At that time, older consumers will join. If they don’t, they’ll get stuck, and not just figuratively. Automatically activated “smart contracts” will allow self-driving cars to change lanes faster than others. Commuters will continually pay each other in official digital currencies or stablecoins like Libra proposed by Facebook Inc., private tokens whose values are fixed relative to fiat money.
Indian millennials have read tea leaves right.
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