International Bitcoin exchange BitBay has reportedly started operations in India, as part of a move geared towards the expansion of its cryptocurrency trading business. Headquartered in Poland, the company is also looking to source local IT talent for product development. This move makes it the first international Bitcoin trading platform to enter India. This development comes at a time when the Indian government is still indecisive about its stance on the legalisation of cryptocurrencies.
According to sources, a demo version of the platform was released on August 14. The exchange will commence Bitcoin trading by August 24.
Commenting on the development, BitBay Chief Information Officer Chafik Abdellaoui said, “Post demonetisation, India emerged as one of the fastest growing economy that resulted into extensive use of digital wallets and transactions. People are very much open to adopt new mode of transactions and crytocurrency can be another model that can pull large no of people who want instant money transactions. We are considering India as largest market of cryptocurrency in coming future. India has huge prospects in virtual currency and Bitbay is actually creating the platform of trade and exchange of cryptocurrencies at their website.”
BitBay’s Indian arm is currently managed by a team of 10. The number will likely increase to 50 by the end of 2017, BitBay India Head Rohit Dahda revealed. He added, “Anyone can trade on the platform, provided they complete the full ‘know-your-customer’ requirements by providing Aadhaar and PAN card number.”
In addition to Bitcoin, the exchange will allow for trading of six other cryptocurrencies, including Ether, Lisk, Litecoin, Monero, Gamecredits and Dash. In its home country of Poland, BitBay enables users to pay at stores and restaurants with cryptocurrency. Poland-based customers are also issued special debit cards that can used for ATM withdrawals.
The company is also in the process of setting up a physical presence in the country to ensure a better customer experience. For the first three months, BitBay will offer traders a 50% discount on commission, as per one Redditor.
When asked about the impact that regulations would have on the fledgeling cryptocurrency marketin in India, Dahda told Inc42, “We welcome any kind of regulation from Govt. and this will help our platform to get more acceptance in country. We are creating model of mandatory KYC and dual authentication for highest level of security for all traders. We do understand value of money of people and dedicated to create a transparent platform. BitBay is regulating itself first and ready to accompany Indian rules.”
Boasting more than 200K users, BitBay currently accounts for more than 60% of the cryptocurrency market in central Europe, in particular, Poland. As stated by Abdellaoui, the Poland-based exchange decided to enter India because of its robust customer authentication infrastructure, which helps minimise risks associated with cryptocurrencies like Bitcoin.
Dahda added, “We are following 360 degree KYC format to keep track of all investors and traders in country. Our high-level security standards, including ‘cold wallets’ policy and 2FA authentication solutions are eligible enough to restrict all type of risks of cryptocurrencies. Our team is taking care of all necessary steps to gel with prescribed rules and regulations of country for BitBay.”
The Government Still Unsure About Legalising Cryptocurrency
With the advent of advanced digital payment technologies, the Bitcoin market has undergone rapid growth in recent times in India. The crypto-asset market is currently worth more than $35 Bn. Bitcoin’s total share in the cryptocurrency space is more than 47.1%, as per reports by Coin Marketcap.
According to a study by Cambridge University, around 2.9 Mn to 5.8 Mn people use cryptocurrency wallets in the world today, chief among them is Bitcoin. At present, there are about 90 other virtual currencies operating worldwide. Among the countries that have banned the use of Bitcoin are Russia, China, Iceland, Bangladesh, Sweden, Thailand and Vietnam.
But the scenario in India is a bit complex. While the use of cryptocurrencies is not strictly illegal, the government is still on the fence about legalising Bitcoin and other virtual currencies. Back in March 2017, the RBI issued a cautionary statement against the usage of cryptocurrency such as Bitcoin. As part of the press release, the central bank warned users, holders and traders of security concerns surrounding Bitcoin or any other virtual currencies.
In June 2017, the country’s Finance Ministry announced the formation of a special committee that would be suggesting measures for eliminating security breaches and vulnerabilities related to cryptocurrency usage. The initiative was deemed as the government’s first step towards legalising Bitcoin cryptocurrency in India. The committee’s report carried the following points:
- Bitcoins would fall under the purview of RBI’s 1934 Act.
- Bitcoin investors should be taxed.
- The RBI would have to issue guidelines regarding investment and purchase of Bitcoins.
- If any foreign payment is made through Bitcoins, it would fall under the purview of the FEMA Act.
- Returns from investment in Bitcoins need to be taxed.
An official close the development told Moneycontrol that, while Bitcoin is unlikely to be declared illegal in India, the appointed committee is still indecisive about which body would be serving as a regulator of cryptocurrencies.
The source said, “Discussions till now suggest that Bitcoin will most likely fall under the ambit of the RBI. But some are of the opinion that Bitcoin is a security rather than a currency and should be regulated by SEBI. The panel does not want to openly term it a currency like how Japan has. But it will take more time to come up with rules around Bitcoin.”
To ensure safe cryptocurrency transactions, the government is reportedly mulling the implementation of Know Your Customer (KYC) norms. At present, the Reserve Bank of India regards cryptocurrencies as a violation of the country’s existing foreign exchange norms. This is because the conversion of Bitcoins into foreign exchange does not fall under the purview of the central banking institution, making such transactions highly unsafe and vulnerable to cyber attacks.
These concerns seem valid, since recently one of India’s largest Bitcoin exchanges Unocoin reported a breach on its platform. In an official statement, the company said, “We have investigated and this does not a look to be a server compromise. Due to our security protocol, just after a few transactions our server identified the pattern and stopped the subsequent transactions by marking it as pending.”
In July, Amit Bhardwaj, founder of two bitcoin companies – cloud mining operation Gainbitcoin and China-based mining pool GBMiners – was accused of running a Bitcoin Ponzi scheme. In the second week of August, a FactorDaily source revealed that the advisory committee appointed by the government might have recommended against the legalising of cryptocurrencies in the country.
Will The Entry Of BitBay Help The Cryptocurrency Market Grow?
According to a 2016 BitConnect report, India has a Bitcoin-trading population of more than 1 Mn users. As per a Trak.in report in 2016, India had more than 50,000 wallets. Of these, 700-800 Bitcoins are operated daily.
In the last few years, despite the lack of regulations in the Indian digital currency industry, a few exchanges have sprung up. Among these are startups like BuyUcoin, Zebpay, Coinsecure and Unocoin. These startups have also attracted investor interest.
In September 2016, for instance, Bengaluru-based exchange Unocoin raised $1.5 Mn in a Pre-Series A round from Blume Ventures, Mumbai Angels and ah! Ventures. Bitcoin trading platform Coinsecure secured $1.2 Mn as part of its Series A investment round from an undisclosed investor in April 2016. Earlier in January, Ahmedabad-based mobile Bitcoin exchange Zebpay raised $1 Mn Series A funding from angel investors.
Recently on August 2, one of the world’s most popular cryptocurrencies underwent its first hard fork, in a bid to solve issues arising from slow transaction speed. Bitcoin Cash, a spin-off of Bitcoin, will reportedly aim to increase the block size by eight times to 8 MB. However, most wallets and exchanges in India will not be integrating Bitcoin Cash.
The global market for cryptocurrencies currently stands at $35 Bn, with Bitcoin prices reaching an all-time high of $4,483 on August 15. By contrast, India’s cryptocurrency market is largely disorganised, with only a handful of players operating in the country. One reason for the industry’s stunted growth is the lack of proper regulations that could not only help bring structure to the sector, but could also facilitate expansion.
Although based in Poland, the BitBay exchange is looking to strengthen its presence in the Indian cryptocurrency industry at a time when regulations are imminent. Whether the entry of established foreign players like BitBay will help bring the market closer to legalisation or make it more susceptible to security breaches is something to track in the coming weeks.