India, the world’s largest democracy and the second most populous country on Earth behind China, has a rocky and tenuous past when it comes to Bitcoin and cryptocurrencies.
With a GDP of approximately $2 trillion and an estimated population of 1.3 billion in 2014, India has a very highly-trained, technical workforce with the planet’s second largest internet user base. There are even more internet users in India than in the USA, according to the Internet and Mobile Association of India (IAMAI) and cellphone giant Ericsson’s recent Consumer Insight Summary Report, "the adoption of smartphones and mobile broadband by people in the lower socioeconomic strata of society is rising."
Meanwhile, the Indian Rupee has lost 40 percent of its value against the dollar since 2008, and the World Bank shows that India received the most in remittances out of any country. During 2014, remittance inflows totaled approximately US$70.4 billion, which accounts for roughly 3.7 percent of the country’s GDP.
Bitcoin, it seems, could find a fertile and receptive market in India. The problem is that once they’ve been received, Indian residents need an easy way to exchange their Bitcoins for Rupees.
Early in 2014, India’s Central Bank (RBI) issued warnings against cryptocurrencies and crowdfunding on multiple occasions. Around the same time Officers from India's federal Enforcement Directorate raided the offices of buysellbit.co.in, a prominent exchange in the Indian city of Ahmedabad. "We have found that through the website 400 persons have recorded 1,000 transactions," one official told DNA India after the raid. "At present, we believe that this is a violation of foreign exchange regulations of the country. If we are able to establish money laundering aspect then he can be arrested."
Following the raid, Buysellbitco.in suspended trading, offering the following message on its homepage: "Post the RBI [Reserve Bank of India] circular, we are suspending buy and sell operations until we can outline a clearer framework with which to work." In the wake of the raids, other exchanges, including Inrbtc followed suit, suspending trades and posting similar warnings.
The country’s first fully-compliant exchange opened in mid 2014. BTCXIndia shut down a year later, in June 2015, when their banking partner pulled out on them. “They will no longer serve bitcoin businesses. We have investigated the possibility through other banks, but it seems this is a general policy in India as of today,” the company stated.
Thankfully, there has been quite a lot of good news coming out of India recently, including kind words about blockchains from the RBI last month, in the form of an official statement and some new guidelines about cryptocurrencies and the blockchain. “With its potential to fight counterfeiting, the ‘blockchain’ is likely to bring about a major transformation in the functioning of financial markets, collateral identification (land records for instance) and payments system,” reads the statement.
“Regulators and authorities need to keep pace with developments as many of the world’s largest banks are said to be supporting a joint effort for setting up of ‘private blockchain’ and building an industry-wide platform for standardising the use of the technology, which has the potential to transform the functioning of the back offices of banks, increase the speed and cost efficiency in payment systems and trade finance.”
- The Reserve Bank of India
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