Cryptocurrency is getting popular in India. This can be seen from the sharp rise in bitcoin trading volumes from November last year, hitting a peak in the last week of May this year when it crossed INR 58 million (US$900,000). The spike coincided with demonetization as the government withdrew high denomination currency notes in a bid to reduce the use of cash and curb black money.
The following chart from Coin Dance, which tracks bitcoin trading in multiple countries, shows how the momentum has picked up in India – a nation of 1.3 billion people which is in the midst of a digital transformation.
The increasing activity hasn’t gone unnoticed among global players in this space.
Blockchain – a six-year-old company based in London and New York, which takes its name from the blockchain technology underlying the digital currency – today announced its entry into India through a partnership with local bitcoin exchange Unocoin. “India is one of the top contenders for becoming the largest market for cryptocurrency,” Blockchain president Nic Cary tells me.
The four-year-old Unocoin is one of the more popular cryptocurrency exchanges in India, enabling its 400,000 users to buy, sell, and store bitcoin in wallets. The partnership with Blockchain, which has 16.5 million users with wallets, widens the scope for trading. It also promises to make transactions faster and more robust as Blockchain has a presence in 140 countries, with billions of dollars in wallet activity.
Another point of interest to Indian users is that the partnership will let them exchange bitcoin for ethereum. Blockchain deals in both cryptocurrencies, unlike Unocoin which trades only bitcoin. A user can buy bitcoin through Unocoin, then trade it for ethereum on Blockchain, explains Cary. That way, investors in cryptocurrencies won’t be putting all their eggs in one basket.
Perhaps most important of all is the trust factor. A number of cryptocurrency wallets and exchanges have bitten the dust through mismanagement, fraud, or theft by hacking – the most infamous flameout of all being Mt Gox. Blockchain managed to ride out these upheavals. It is now expanding and scaling up in tandem with the fast-rising bitcoin rate, which has increased demand for the wallet.
Bitcoin and ethereum rates tumbled by 20 percent and 30 percent respectively after China banned ICOs (initial coin offerings) – a new way for companies to raise funds in exchange for digital tokens which can be traded. The Chinese government felt this unregulated form of fundraising risked huge scams and consequent social disorder.
Cary is unfazed by the slide, which appears to have leveled off. Such ups and downs have been par for the course in his four-year journey since taking the helm at Blockchain. But it does underscore the impact that new regulations could have on cryptocurrency wallets, exchanges, and users.
Last month, Unocoin suspended access to all users after a theft from its wallets. It appeared to have caught the pilfering in time, and stopped it. It also accepted blame for not preventing the theft and returned the lost bitcoin to affected wallets in an attempt to keep up the confidence of users.
Nevertheless, the security and regulatory issues around bitcoin and ethereum are just as much a matter of debate as the potential of the cryptocurrencies to disrupt traditional modes of payments, savings, and banking. More on this in a Q&A with Nic Cary to follow.