implied a ban on all private virtual coin. Prices of the most-valued cryptocurrencies such as Bitcoin and Ethereum fell as much as 15%. Crypto exchanges took to calming investors, urging them not to rush into selling.
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, which will be introduced in the next session of Parliament “seeks to prohibit all private cryptocurrencies in India” but allows for “certain exceptions to promote the underlying technology and its uses”, according to the Lok Sabha bulletin issued Tuesday evening.
This sparked fear as the description was the same as that used earlier this year when talks of a ban first emerged. Crypto industry executives said the panic was premature, based on discussions exchanges they have had with the government and regulators in the past few months.
Since Tuesday, the value of these coins have recovered to a degree on top exchanges including CoinDCX, WazirX, and crypto exchange aggregator CoinSwitch Kuber.
“As of now, I urge all crypto asset investors in the country to remain calm, do their own research before arriving at a rushed conclusion,” CoinSwitch Kuber founder and CEO Ashish Singhal tweeted.
“Investors should wait for a government statement on this matter and not rely on secondary sources of information,” Singhal said. “The crypto industry is hopeful that the government will involve the industry stakeholders while drafting the bill. At CoinSwitch Kuber, we shall follow the directions provided by the government.”
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Singhal is also co-chair of the Blockchain and Crypto Assets Council (BACC), a part of the Internet and Mobile Association of India (IAMAI).
Trading volumes surged 50% from the average on Tuesday night, said WazirX CEO Nischal Shetty. The selloff appeared to be tapering off by Wednesday evening, but it was still a sellers’ market, experts said. The selling began in earnest late Tuesday as TV and social media channels began flashing the contents of the bulletin. Crypto platforms are open round the clock for trading. Investors hit the sell button wanting to curtail losses as coin prices started falling.
“BuyUcoin witnessed a selloff from new investors who started investment in 2021,” said Shivam Thakral, CEO of BuyUcoin, a homegrown cryptocurrency exchange.
For most new investors, the news was a bolt from the blue.
“The panic was largely on the Indian exchanges. And the sellers were the new investors who had entered the market due to the crypto hype and then made some return on their investments in the last few months,” said Vishal Gupta, a 34-year-old Noida-based crypto investor, who also runs a popular crypto YouTube channel. “They had absolutely no experience of dealing with volatility. They quickly started disposing of their coins.”
As more investors tried to sell, Indian platforms were swamped with traffic. With no buyers, orders started accumulating, leading to delays and order cancellations, which further fuelled panic. WazirX was one of those that got backed up.
To be sure, some investors were making money off the arbitrage.
The price of stablecoin tether started falling on Indian exchanges as investors sold assets at lower prices — Rs 60 levels. These were picked up by more sophisticated buyers to be sold on international exchanges, which had higher rates — it was above Rs 74 on Wednesday evening. “Smart money made a killing yesterday,” said Gupta.
Large and sophisticated Bitcoin investors maintain trading accounts on both Indian and global exchanges.
Indian crypto exchanges insisted that the percentage of investors selling was small.
“Only 10-15% of the investors have sold their holdings, the rest are holding tight,” said Thakral. “BuyUcoin is well equipped to handle any level of trading activity on its platform. We may see seasoned investors take advantage of the price dip and go on a buying spree.”
In the 24-hour period till 7 pm on Wednesday, Bitcoin dropped 9.28%, Ethereum was down by 11.95 %, DogeCoin fell 11.89%, and Shiba Inu slumped 16.19%, on WazirX. Prices of crypto assets differ on various exchanges at any point of time.
The top exchanges are waiting for government clarifications in the hope that industry inputs will be considered in the bill that will eventually be introduced in Parliament.
Tanvi Ratna, chief executive officer and founder of think tank Policy 4.0, said some coins like Bitcoin and Ethereum may be allowed in some form and that a blanket ban could further make India a hotbed for peer-to-peer transactions.
Crypto exchanges sought to soothe the nerves of investors.
“We are considering reaching out to all our 50,000 registered investors through our channels to urge them to ignore the noise around and carry on their investing journey with a long-term wealth building approach,” said Edul Patel, CEO and co-founder of Mudrex.
The crypto industry feels that the government should take a nuanced approach toward regulating crypto assets in India.
“With the positive outcome of the cryptocurrency bill, India will embark on an exciting journey of becoming the global leader in crypto, DeFi (decentralised finance), and NFTs (non-fungible tokens),” said Jay Hao, CEO of cryptocurrency exchange OKEx.com. “India is home to the highest number of crypto owners in the world and the onus lies on the government to protect the interest of many crypto investors in the country. I strongly believe that the global crypto community will be watching closely the developments around India’s crypto bill.”
Earlier this month, Prime Minister Narendra Modi
had chaired a high-level meeting on cryptocurrencies with officials from the RBI, finance ministry, and the Securities and Exchange Board of India (Sebi).
Following that, the parliamentary standing committee on finance met crypto industry representatives, stakeholders and experts. Panel chairman Jayant Sinha had told ET that the committee hadn’t taken a view on cryptocurrencies, adding that the industry claimed 15 million registered users with total investments at Rs 600 crore.
Concerns have been rising over the increasing popularity of cryptocurrency as an investment.
“It is important that all democratic nations work on this (cryptocurrency) and ensure that it does not end up in wrong hands, which can spoil our youth,” the PM had said at The Sydney Dialogue last week.
The government is unlikely to shut its doors completely to cryptocurrencies and instead take a nuanced approach, ET had reported earlier this month. Cryptocurrencies may not be permitted as legal tender to settle transactions and make payments but could be held as an asset like shares, gold or bonds, the report said.
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