Regulation Is Shaping The Bitcoin Landscape

Unocoin, India’s most popular bitcoin exchange, has added rupee (INR) wallets to their platform, enabling storage of INR for instant bitcoin buys. Users had previously needed to either use a credit card or bank transfer, which made buying bitcoins either expensive or slow. With the new ability to deposit rupees onto the website, Indians will now be able to receive their bitcoins right away and not have to pay any extra fees.

The Indian bitcoin exchange’s rollout of the service has been vastly different compared to its counterpart in the USA. Coinbase, a large bitcoin exchange, launched a fiat wallet that is currently only available to a small portion of US citizens. Unocoin on the other hand, made their fiat wallets available to everyone in India, a country with a population of 1.21 billion people, at launch.

Coinbase launched on the first of December. The USD wallets are available in 16 US jurisdictions, including Puerto Rico, Delaware, and California. A month and half later, Coinbase expanded the service to New Hampshire, New York and five other US states. Though the company hopes to make the service available in all US states; almost 2 months since the initial launch of the service, it’s still only available in 23 US jurisdictions.

The contrast of the expansion of financial services in the US and other countries is made even more apparent, when one looks at Coinbase’s expansion internationally. In early September, Coinbase expanded to France, Spain, Greece, and 10 other European countries. Since the launch of fiat wallets, all of the inhabitants in the 13 European countries Coinbase operates in have been able to store fiat on the platform, and use the instant buy feature for bitcoins. Despite being the same service by the same company, Europeans have it while many Americans are still waiting for it.

"Coinbase’s cooperation with its regulators in the US and abroad is a priority company investment, and we will continue to collaborate with regulators to establish sanctioned avenues for Coinbase to offer its USD wallet and other Coinbase services – whether the approach is to regulate such services under conventional payments rules and laws, new bitcoin-specific guidance, or not to regulate at all. We hope to offer USD Wallet in all US jurisdictions in the near future,” said Coinbase’s legal counsel, John Suarez.

Founder of Unocoin, Sathvik Vishwanath, told BNC News that his company was able to offer the service to all Indians right away because India’s 36 states do not have their own set of financial regulations to comply with. This is in stark contrast to the US regulatory landscape Coinbase operates in.

“The current money transmitter licensing system already has a great deal of overlap between each state, requiring companies to go through the same processes up to 48 times, including fingerprinting, surety bonds, capital requirements, costly on-site examinations, and reporting obligations,” wrote Coinbase in a press release.

Despite not having the headache of 48 state licenses, there are certainly disadvantages for bitcoin companies in India. On July of 2014, a Unocoin representative wrote on BitcoinTalk.org, “Based on the regulatory compliance in India we are not allowed to keep INR on behalf of customer. Do not ask me how some other exchanges in India are doing it”

Months later, Unocoin announced the ability to temporarily store funds on the website, but it is still not legally allowed to do so for a long period of time. In India, only registered E-wallets and banks may hold funds for long periods, acting as custodians. Unocoin instead serves as a broker, a customer may hold funds with the company for one business cycle, which is a 90 day period. After 90 days, any remaining funds are sent back to the bank account of the customer.

Coinbase on the other hand, can store funds for its customers for as long as they would like. Under US laws, Coinbase can hold funds with no time limit.

Unocoin is taking extra steps to make sure it is on the right side of India’s bitcoin regulations. The exchange is voluntarily sending all the fait a person gets from selling bitcoin on the site to their bank account and not their Unocoin INR wallet. This is an attempt to have more transparency and make sure there is a proper bank transaction. The company feels society at large and regulators will see them as more trustworthy, something very important for a currency and company getting more and more attention in India.

Bitcoin regulation in both countries, remains unclear and has an uncertain future. As a result, regulatory compliance is a key focus, as it will allow them to stay open for business. Regardless of specific regulations, the laws and regulatory climate in each country is shaping how bitcoin companies expand, operate, and do business.