For Ajith Abraham, 27, buying bitcoins was an experiment to understand the buzz around the virtual currency. His $800 purchase last year is worth $4,300 (nearly 2.8 lakh) today, and bitcoin is now a new investment tool for the human resource manager. “I do not intend to sell it soon.”
The cryptocurrency invented in 2009 by Satoshi Nakamoto, an alias for an anonymous programmer, has surged over 600 percent over the past year, according to Bloomberg. It topped record $5,000 (nearly Rs 3.2 lakh) for the first time earlier this year. And the euphoria is catching up in India.
Demand Has Increased Despite Risks
India accounted for 10 per cent of the global trade in June, according to data from Bitcoin trade analyst Chris Burniske. He tweeted a chart tracking the cryptocurrency volume that show 16,755 coins traded in India.
Like Abraham, for most people it’s an investment option, and they are undeterred by extreme price swings. On Monday, Bitcoin tumbled as much as 12 percent to $4,259 (around Rs 2.7 lakh) after China declared initial coin offerings illegal. Like IPOs, these issues raise funds to float new cryptocurrencies. Even the Reserve Bank of India warned about the risks involved in virtual currencies that are unregulated in India.
Yet, demand has increased despite the risks. Two-year-old bitcoin wallet Zebpay has close to 10 lakh users, and added 1 lakh users last month. The number keeps doubling every three-four months, Saurabh Agrawal, co-founder of Zebpay, said over the phone.
“How gold was considered wealth by grandparents, similarly bitcoin is now considered wealth for my sons,” said Agrawal.
Unocoin, a Bengaluru-based bitcoin exchange, has around 4 lakh users and added 50,000 last month. It sees 500 transactions a day with an average value of Rs 30,000.
“People are either storing bitcoin as a value (investment) or cash out when they see a spike,” said Sathvik Vishwanath, co-founder at Unocoin which has partnered with more than 1,900 businesses. Most of the merchants are inactive since users are holding on to the digital currency.
Virtual Currency is The Future
Suryawanshi restaurant in Bengaluru added bitcoin as an additional payment mode nearly a year ago. Yet, it has just made one transaction in 11 months. Owner Tejas Suryawanshi, 24, isn’t disappointed.
I know people might not use bitcoin today but soon they will. I am just a step ahead of everyone else
Agreed Arpit Agarwal, principal at early-stage investment firm Blume Ventures that has backed Unocoin. “Technology is a new way to think about money, as you can transfer to anyone, anywhere in no time and without any cost,” he said.
The impact it can have is only beginning to show. With the surge in value, it has become the “new virtual gold of young Indians”, Agarwal said.
‘Government Should Regulate Cryptocurrency’
India is yet to regulate cryptocurrencies even as countries like the US, Russia and Japan have classified them as either property or legal payment methods to prevent money laundering. Even Venezuela allows payments via digital currencies.
The RBI has repeatedly warned holders and traders of virtual currencies against its potential risks. The government is also considering tracking the currency through the central bank and markets regulator along with intelligence agencies to monitor money laundering and terror financing, Bloomberg reported in July citing people with the knowledge of the matter.
A Mumbai-based investor requesting anonymity said the government should regulate the cryptocurrency for more control. Declaring it illegal will only make it more difficult for the government to track, the investor said.
Zebpay and Unocoin want clarity. “A lot of people believe in this technology and are sitting on the edge, waiting for the government to take a stand,” Agrawal of Zebpay said. As soon as Japan legalised Bitcoin, 40 percent of the global volume started coming from the east Asian nation, he said.
(This article first appeared on Bloomberg Quint.)
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