Evolving cryptocurrency in India
07 Aug 24
Despite being near the beginning of its crypto journey, India faces regulatory challenges
Image: editableclips/stock.adobe.com
In recent years India has been beginning to embrace the emergence of cryptocurrency in their financial landscape.
Within the asset servicing world, certain businesses have been hesitant to take part in this transformative shift. Despite this, India has taken a big leap into viewing cryptocurrency as a priority in its markets, with companies such as Bitget adapting to these changes.
Crypto history
Firstly, it is worth noting that digital assets have existed for over a decade before the launch of bitcoin in 2009, where it was initially transactioned. As mentioned in ??a paper ‘A STUDY ON CRYPTOCURRENCY IN INDIA,’ written by Mr. Qazi Shadab Alam and Ms. Flavia Gonsalves, Bitcoin was invented in “2008 by an unknown person or group of people using the name Satoshi Nakamoto and started in 2009 when its source code was released as open-source software. Bitcoins are created as a reward for a process known as mining.”
Research that was conducted by the University of Cambridge estimated that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using Bitcoin. The paper states that the rise of digital currency in India, came about as a means of fighting corruption and terrorism. In order to do so, in 2016, the Prime Minister of India at the time, Narenda Modi, was said to surprise the nation by demonetising “500 rupee and 1,000 rupee currency notes”.
The demonetisation of notes was said to amount to “86 per cent of India’s cash in circulation,” but we must pay attention to the fact that “87 per cent of transactions [in India] were done by cash” as the paper says. The demonetisation of the cash inevitably led to economic chaos in India. Many were left to stay in long queues at the ATMs and banks for long periods of time. The paper further highlights that the bank themselves did not have enough cash to dispense.
It was clear that India needed to develop new methodology surrounding its currency and perhaps take after the rest of the world, “sparking a new interest in digital currency and other cashless mechanisms such as banking, digital wallets and credit cards”.
Modern-day regulation
Despite the initial increase of digital currency in India, there has been a downtrend which many attribute to the increase of government regulations. Companies such as Bitget have to learn to navigate this regulatory landscape.
As stated in ‘Blockchain and Cryptocurrency Laws and Regulations 2024’ on Global Legal Insights, in the current legal landscape of India, Voluntary Disclosure Agreements (VDAs) “are not expressly regulated nor prohibited.” Individuals and entities have permission to “hold, invest in, and transact VDAs, as long as they abide by existing laws”.
Simran Alphonso, head of global PR and communications at Bitget, says that in order to keep up with the evolving frameworks around cryptocurrency, “companies need to have a proactive compliance approach to meet with the regulatory requirements”. She highlights that “engaging with policymakers, and adopting best practices for transparency and security ranks top amongst all”.
At Bitget, the company has proof-of-reserves that ensures the users’ funds. In addition, the company has invested “US$400 million protection fund to add another layer of protection to users interests.” Is it clear to see the importance of “companies leveraging advanced security standards and [abiding] by correct practices” is crucial in order to navigate and grow in the crypto landscape, highlights Alphonso.
Factors such as Know Your Customer (KYC) and Anti-Money Laundering (AML) have always played a key factor in financial institutions, but focusing on it from a cryptocurrency lens, these protocols may aid the security factors in digital assets through the use of advanced verification technologies, regular audits and compliance checks.
Alphonso says: “Businesses are collaborating with regulatory bodies to ensure all processes align with legal standards.”
She further speaks about how Bitget takes regulatory requirements “very seriously”. Most recently, Bitget research reported about deep fake crimes that may “account for 70 per cent of all crypto crimes after which [they] partnered up with Sumsub to secure Bitget’s 25 million users worldwide with 99 per cent accuracy rate in identifying deep fakes and scams .The main features Sumsub provides to Bitget are Identity Verification, Liveness (facial biometrics check), Non-Doc Verification along with Database Validation and more.”
How are Indian crypto-related firms addressing the ever-shifting sands of regulation and government intervention?
Challenges in cryptocurrency
Emerging as a new cryptocurrency landscape has not been easy, but India is gradually developing its use of digital currencies. It does, however, still face many obstacles.
Alphonso highlighted that the recent Indian crypto ecosystem faced a “big lash from WazirX’s hack”.
According to WazirX, the cyberattack that occurred in India resulted in the theft of approximately US$230 million, which it says was equivalent to 45 per cent of the company’s user funds.
This may have led to a decrease in user confidence, but firms such as Bitget have focused on monitoring the “flow of stolen assets” with their partners, Chainalysis, says Alphonso.
She sheds light on the procedures that should be taken in order to overcome any challenges that firms may need to overcome, which include processes such as “tightening security, prioritising users safety, and complying with partners for a more sophisticated trading experience”.
“This needs to be clubbed with support from regulators and strict policies to avoid such mistakes in the future,” she continued. But it has become clear that addressing security concerns is crucial for building trust between a client and the business.
Alphonso speaks about the implementation of advanced security, which includes examples such as “robust IT systems, continuous monitoring, and protection against hacks and theft that can ensure the safety of users’ funds”. Since its launch in 2018, Bitget has been practising compliance providing higher security measures to its users. Bitget mitigates risks with a protection fund valued at US$400 million, highlights Alphonso.
Crypto conclusion
The asset servicing financial landscape has evolved continuously throughout the years, and many firms and businesses have kept up with the times and adjusted to the modernity of digital assets.
Even though India is at the beginning of its journey with digital assets, it still seems to have a lot of work ahead. In order to expand and provide better services to its customers, firms must stay ahead of the times and monitor important factors such as security, transparency, transaction fees and the availability of assets, as commented on by Alphonso.
Despite the challenges India’s digital assets faced through the WazirX hack, it seems to be heading in the right direction, overcoming any obstacles it may face through its journey in cryptocurrency.
Within the asset servicing world, certain businesses have been hesitant to take part in this transformative shift. Despite this, India has taken a big leap into viewing cryptocurrency as a priority in its markets, with companies such as Bitget adapting to these changes.
Crypto history
Firstly, it is worth noting that digital assets have existed for over a decade before the launch of bitcoin in 2009, where it was initially transactioned. As mentioned in ??a paper ‘A STUDY ON CRYPTOCURRENCY IN INDIA,’ written by Mr. Qazi Shadab Alam and Ms. Flavia Gonsalves, Bitcoin was invented in “2008 by an unknown person or group of people using the name Satoshi Nakamoto and started in 2009 when its source code was released as open-source software. Bitcoins are created as a reward for a process known as mining.”
Research that was conducted by the University of Cambridge estimated that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using Bitcoin. The paper states that the rise of digital currency in India, came about as a means of fighting corruption and terrorism. In order to do so, in 2016, the Prime Minister of India at the time, Narenda Modi, was said to surprise the nation by demonetising “500 rupee and 1,000 rupee currency notes”.
The demonetisation of notes was said to amount to “86 per cent of India’s cash in circulation,” but we must pay attention to the fact that “87 per cent of transactions [in India] were done by cash” as the paper says. The demonetisation of the cash inevitably led to economic chaos in India. Many were left to stay in long queues at the ATMs and banks for long periods of time. The paper further highlights that the bank themselves did not have enough cash to dispense.
It was clear that India needed to develop new methodology surrounding its currency and perhaps take after the rest of the world, “sparking a new interest in digital currency and other cashless mechanisms such as banking, digital wallets and credit cards”.
Modern-day regulation
Despite the initial increase of digital currency in India, there has been a downtrend which many attribute to the increase of government regulations. Companies such as Bitget have to learn to navigate this regulatory landscape.
As stated in ‘Blockchain and Cryptocurrency Laws and Regulations 2024’ on Global Legal Insights, in the current legal landscape of India, Voluntary Disclosure Agreements (VDAs) “are not expressly regulated nor prohibited.” Individuals and entities have permission to “hold, invest in, and transact VDAs, as long as they abide by existing laws”.
Simran Alphonso, head of global PR and communications at Bitget, says that in order to keep up with the evolving frameworks around cryptocurrency, “companies need to have a proactive compliance approach to meet with the regulatory requirements”. She highlights that “engaging with policymakers, and adopting best practices for transparency and security ranks top amongst all”.
At Bitget, the company has proof-of-reserves that ensures the users’ funds. In addition, the company has invested “US$400 million protection fund to add another layer of protection to users interests.” Is it clear to see the importance of “companies leveraging advanced security standards and [abiding] by correct practices” is crucial in order to navigate and grow in the crypto landscape, highlights Alphonso.
Factors such as Know Your Customer (KYC) and Anti-Money Laundering (AML) have always played a key factor in financial institutions, but focusing on it from a cryptocurrency lens, these protocols may aid the security factors in digital assets through the use of advanced verification technologies, regular audits and compliance checks.
Alphonso says: “Businesses are collaborating with regulatory bodies to ensure all processes align with legal standards.”
She further speaks about how Bitget takes regulatory requirements “very seriously”. Most recently, Bitget research reported about deep fake crimes that may “account for 70 per cent of all crypto crimes after which [they] partnered up with Sumsub to secure Bitget’s 25 million users worldwide with 99 per cent accuracy rate in identifying deep fakes and scams .The main features Sumsub provides to Bitget are Identity Verification, Liveness (facial biometrics check), Non-Doc Verification along with Database Validation and more.”
How are Indian crypto-related firms addressing the ever-shifting sands of regulation and government intervention?
Challenges in cryptocurrency
Emerging as a new cryptocurrency landscape has not been easy, but India is gradually developing its use of digital currencies. It does, however, still face many obstacles.
Alphonso highlighted that the recent Indian crypto ecosystem faced a “big lash from WazirX’s hack”.
According to WazirX, the cyberattack that occurred in India resulted in the theft of approximately US$230 million, which it says was equivalent to 45 per cent of the company’s user funds.
This may have led to a decrease in user confidence, but firms such as Bitget have focused on monitoring the “flow of stolen assets” with their partners, Chainalysis, says Alphonso.
She sheds light on the procedures that should be taken in order to overcome any challenges that firms may need to overcome, which include processes such as “tightening security, prioritising users safety, and complying with partners for a more sophisticated trading experience”.
“This needs to be clubbed with support from regulators and strict policies to avoid such mistakes in the future,” she continued. But it has become clear that addressing security concerns is crucial for building trust between a client and the business.
Alphonso speaks about the implementation of advanced security, which includes examples such as “robust IT systems, continuous monitoring, and protection against hacks and theft that can ensure the safety of users’ funds”. Since its launch in 2018, Bitget has been practising compliance providing higher security measures to its users. Bitget mitigates risks with a protection fund valued at US$400 million, highlights Alphonso.
Crypto conclusion
The asset servicing financial landscape has evolved continuously throughout the years, and many firms and businesses have kept up with the times and adjusted to the modernity of digital assets.
Even though India is at the beginning of its journey with digital assets, it still seems to have a lot of work ahead. In order to expand and provide better services to its customers, firms must stay ahead of the times and monitor important factors such as security, transparency, transaction fees and the availability of assets, as commented on by Alphonso.
Despite the challenges India’s digital assets faced through the WazirX hack, it seems to be heading in the right direction, overcoming any obstacles it may face through its journey in cryptocurrency.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
