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
The statement comes after an extremely bullish, pro-bitcoin article in August from the Times of India, which is the country’s largest English-language newspaper and third largest overall. “India currently has around 50,000 bitcoin enthusiasts, with 30,000 of them actually owning the currency. With increasing ease of using them for purchases through mobile apps, bitcoins are quickly transitioning from being trading units to shopping currency,” states the articles author, Lubna Kably.
In a country of well over a billion people, this number may seem insignificant, but it is far higher than any previous estimation. While most Indian exchanges keep their volume statistics private, LocalBitcoins’ data is open and does indeed confirm a large and obvious volume increase since the publishing of that article.
There are many new merchants and bitcoin-related services arriving on the scene too, including India’s first University to accept bitcoins for tuition, according to the Indian Times, Dharwad International School in Karnataka. However, if there is any other single factor to attribute this surge to, it’s likely the recent string of successes by Ahmedabad-based startup Zebpay, who announced last week that it has raised US $1 million in VC funding in order to promote bitcoins throughout India.
Zebpay is likely to remind western Bitcoiners of Coinbase. The two companies have many things in common, from the services they offer to their apparent dedication to spread Bitcoin to the world.
Self-described as “the world's simplest bitcoin mobile wallet,” the Zebpay mobile wallet claims to provide the "fastest and easiest way to Buy and Sell Bitcoins in India." According to their website. "We guarantee the best rate for your bitcoin buy or sell,” referring to the in-wallet exchange that Zebpay offers, a completely unique service in India.
"You can use Zebpay to send and receive Bitcoins as easily as instant messaging. With Zebpay, there is no need to worry about Bitcoin addresses or wallet backups. You can simply send Bitcoins to contacts using their mobile number."
Co-founder Saurabh Agrawal said that the most popular use of the cryptocurrency on Zebpay has been to obtain discounted store vouchers. The company says that it sees at least 500 new users signing up for their mobile app each week. The company started selling vouchers for Amazon, Flipkart, Freecharge, Bookmyshow and Makemytrip in June, at discounts up to 10 percent off through their mobile interface."We buy vouchers from e-commerce companies and sell these online against bitcoins. We are seeing a monthly growth of 100%," he told the Times of India.
In July, Zebpay enabled its mobile users to recharge their prepaid airtime plans, or pay for their postpaid airtime plans with many of the top telecom operators in India. The following month they raised their withdrawal limits significantly, and in October, they launched an 'Instant Bitcoin Buy' feature, which allows customers to receive bitcoins in their mobile wallet instantly, a service that US-based exchange Coinbase pioneered previously.
In the same month, the company took first prize as the winner of CoinAgenda's first conference dedicated exclusively to bitcoin and cryptocurrency investors, which preceded the aforementioned $1 million VC investment by three prominent Venture Capital investors in India. Perhaps the most interesting thing about this windfall is that it is not dependent on support from regulators or the RBI; its sole charter is to promote bitcoins in India, even if Bitcoin never gets direct support from regulators.
Aggarwwal has already said that they’ll be using the money for a dedicated blockchain laboratory, where they hope to not only offer advancement to the community in general, but “enable the company to leverage the power of blockchain to innovate authentication and authorisation of transactions.”
"The environment in India for cryptocurrency is extremely positive and we are planning to utilise the amount to promote bitcoins as a reliable currency and investment option, enlist more e-vouchers on our mobile platform with a target to expand our user base from 25,000 to around one lakh within the next one year and ultimately become a bitcoin payment gateway"
- Saurabh Aggarwal, Zebpay co-founder
With all of the exciting Bitcoin news coming out of the world’s second largest country, it is hard to imagine India not joining the US, Europe, and China as a constant source of volume and newsworthy affairs in the Bitcoin world over the next year or two.