Tech
How tech-savvy traders are bypassing the government’s crypto bloc
New Delhi: India’s Ministry of Electronics and Information Technology (Meity) is yet to come up with a solution for local cryptocurrency users accessing global cryptocurrency exchanges via virtual private networks (VPNs). On January 12, the government blocked web and app store access to Binance, Kucoin, Huobi and six other exchanges.
New Delhi: India’s Ministry of Electronics and Information Technology (Meity) is yet to come up with a solution for local cryptocurrency users accessing global cryptocurrency exchanges via virtual private networks (VPNs). On January 12, the government blocked web and app store access to Binance, Kucoin, Huobi and six other exchanges.
“We are aware that access to offshore crypto platforms is available via VPN and we are working to find a way around this,” Meity Secretary S. Krishnan said. “However, it is not a question of applying regulatory hurdles; we will have to find a technological solution to block offshore trades despite VPNs.”
HI! You are reading a premium article! Sign up now to continue reading.
Already registered? Login
Premium benefits
-
35+premium articles every day
-
Particularly cared for Newsletter everyday
-
Access to 15+ printed edition articles every day
-
Webinar reserved for subscribers by specialized journalists
-
E Paper, Archives, select Articles from the Wall Street Journal and the Economist
-
Access to special offers reserved for subscribers: Infographics Podcasts
Unlock over 35 well-researched
premium items every day
Access global insights with
Over 100 exclusive items from
international publications
Newsletter for 5+ subscribers only
specially curated by experts
Free access to e-papers and
WhatsApp updates
“We are aware that access to offshore crypto platforms is available via VPN and we are working to find a way around this,” Meity Secretary S. Krishnan said. “However, it is not a question of applying regulatory hurdles; we will have to find a technological solution to block offshore trades despite VPNs.”
Tech-savvy users see IP blocking as a small hurdle they are willing to overcome, especially since all cryptocurrency operations on Indian exchanges attract a 1% tax deducted at source (TDS) and there is increased liquidity on global cryptocurrency exchanges.
To be sure, the use of VPNs may slow the small recovery seen on Indian cryptocurrency exchanges when global IPs were blocked.
Even a bull run in cryptocurrencies, the first in two years, especially in the US, does not guarantee higher volumes because users can easily bypass Indian exchanges and transact directly with companies like Binance (the world’s leading cryptocurrency exchange with average daily trades). volume of $14.86 billion, according to tracker Coinmarketcap) and others.
The blocking of global crypto IPs followed a recommendation to this effect on December 28 by the Finance Ministry’s Financial Intelligence Unit (FIU) due to the exchanges’ non-compliance with India’s Prevention of Money Laundering Act (PMLA), 2002.
The FIU advisory and subsequent lockdown helped revive Indian trade volumes to some extent.
Minal Thukral, executive vice president and head of growth and strategy at CoinDCX, said that CoinDCX saw a 200-fold increase in weekly cryptocurrency deposits in the week following the FIU alert, compared to the previous week, “and they are mostly coming from other exchanges.” She also added that CoinDCX’s daily trading volume has “nearly doubled” since the notification, without providing absolute numbers.
“Most new users would not want to live under regulatory uncertainties that their investments could be frozen by withdrawal flexibility due to regulations,” Thukral said.
“Furthermore, retail users would like to profit from the bull run the market is experiencing, which is likely to see the light of day until 2024.” Rajagopal Menon, vice president of fellow cryptocurrency exchange WazirX, painted a similar growth picture. At the end of the September quarter, our annual cryptocurrency trading volume had fallen to approximately $4 billion per year from a high of $43 billion seen in early 2022.
“We are now close to an average annual trading volume of about $8 billion, which is double what we were down to,” he said.
“We are still very, very far from where we peaked; our trading volumes have declined by more than 90% from our peaks,” Menon added.
“This will not return anytime soon, although 2024 promises to be a bullish year for the global cryptocurrency industry.” In comparison, Coinmarketcap data showed that CoinDCX and WazirX trading volumes stood at $6.58 million and $2.72 million, respectively, as of Friday. .
Balaji Srihari, head of trading at CoinSwitch, said the exchange’s weekly trading volume increased by as much as 35% in the week after Dec. 28, when the FIU issued its warning to offshore exchanges.
Exact data on CoinSwitch trading volume could not be ascertained.
A senior official close to developments in the matter said WazirX has also worked with the FIU to ensure compliance with India’s financial laws, which could prove beneficial in the long run.
Meanwhile, a global cryptocurrency bull run is being fueled by a resurgent Bitcoin token. After falling to a low of around $24,900 last September from a high of $68,000 in November 2021, the world’s largest crypto token recovered to over $48,600 on January 11, the day the Securities and Exchange Commission (SEC ) of the United States has approved investment firms to create exchange-traded funds (ETFs) for Bitcoin. In three trading days, Reuters reported that Bitcoin ETFs surpassed $2 billion in trading volume.
However, not all parties were so enthusiastic. At the Mint BFSI Summit and Awards held on the same day (January 11) in Mumbai, Reserve Bank of India Governor Shaktikanta Das said that “India’s stance on cryptocurrencies remains unchanged: I don’t think emerging markets can catch the crypto mania “. JP Morgan Chief Jamie Dimon also spoke out against the value of Bitcoin, questioning optimists on the crypto token.
All these factors come together as challenges that Indian stock exchanges need to address before potentially seeing a steady increase in business. WazirX’s Menon added that there is also an issue of volatility, but companies like BlackRock investing in Bitcoin could help stabilize the market.
“Yes, there may be volatility of almost 30%, but Bitcoin will rebound in value and long-term investors will not exit. Investors en masse, however, will continue to find a way to invest through global exchanges, as long as India will not find a way to review the impact of the 1% TDS on all cryptocurrency operations.”
Capture everything Economic news, Market news, Latest news Events e Latest news Updates on Live Mint. Download The Mint News App to get daily market updates.