Global digital currency exchanges are looking for ways to establish themselves in India and are following in the footsteps of market leader Binance, industry sources told Reuters, while the New Delhi government is hesitant about introducing a law that could ban cryptocurrencies.
Opponents of the possible ban say it would stifle the economic power of a tech-savvy young nation of 1.35 billion people. There is no official data, but industry analysts estimate that there are 15 million crypto investors in India holding more than 100 billion rupees ($ 1.37 billion).
US Kraken, Hong Kong Bitfinex and rival KuCoin are actively exploring the market, which analysts say would only get bigger if it did, according to four sources that refused to be identified for not having the authority to comment on private discussions it would be left free. “These companies have already started discussions to better understand the Indian market and entry points,” said a source directly involved in an exchange that had begun due diligence for an Indian company it was planning to acquire.
The other two exchanges, he said, are in the early stages of deciding whether to travel to India and are weighing their options, which effectively boils down to a choice of whether to set up a subsidiary or buy an Indian company like Binance did did two years ago.
Bitfinex declined to comment, while Kraken and KuCoin did not respond to an email requesting a comment.
All three exchanges are ranked in the top 10 in the world by the CoinMarketCap data platform based on their traffic, liquidity and the trustworthiness of their reported trading volumes.
“The Indian market is huge and it is only starting to grow if there was more political security now, Indian consumers would be spoiled for choice when it comes to exchanges because everyone wants to be here,” said Kumar Gaurav, founder of digital Bank Cashaa.
Proponents of cryptocurrencies say it would be the most cost-effective way to send funds home for Indians overseas.
However, authorities fear that rich people and criminals may hide their wealth in the digital world and that speculative cash flows through digital channels that are not controlled by India’s strict currency controls could destabilize the financial system.
So far, there have been no rules in India specifically for cryptocurrency exchanges that want to set up in the country. Instead, they could register as a tech company for a relatively easy path to entry.
In 2019, Binance acquired WazirX, an Indian cryptocurrency startup that enabled users to buy and sell crypto using rupees on the Binance Fiat Gateway.
The US exchange Coinbase has announced plans for a back office in India.
But as the regulatory environment for cryptocurrencies deteriorates globally, Indian authorities are exercising tighter scrutiny.
In China, authorities have banned banks and online payment companies from offering services related to cryptocurrency transactions.
And the Indian government should submit a bill to parliament by March banning cryptocurrencies, which makes trading and holding cryptocurrencies illegal. But the government has held it back, and conflicting statements have since fueled uncertainty about the fate of the bill.
Meanwhile, major Indian banks have begun severing ties with cryptocurrency exchanges and traders amid the Reserve Bank of India’s concerns about the financial stability risks posed by the volatile asset.
RBI is considering introducing its own digital currency, but Governor Shaktikanta Das called these plans “in the works” in February.
With all the uncertainty about what India will do in the end, some digital currency exchanges are clearly of the opinion that it would be better to gain an entry than to miss it.
“It is clear that the benefits outweigh the perceived risks in attracting these global companies to the Indian market,” said Darshan Bathija, CEO of Vauld, an overseas crypto exchange with a presence in India.