India is one of the biggest markets in the world. With 1.3 billion people, it is second only to China in terms of population - although much more segmented than the latter.
Like China, India appears to be enforcing a hardline approach to crypto regulation. The government has made moves to ban cryptocurrencies and restrict commercial banks from serving crypto companies in any capacity. However, crypto firms aren’t giving up on the country.
Possible Entrance Strategies
Early last month, Reuters reported that several top crypto exchanges - including Kraken, KuCoin, and Bitfinex - were mulling entering the crypto industry. According to the report, the three exchanges could simply pursue the entry strategy adopted by Binance - buying a local exchange and letting it run semi-autonomously.
Reuters explained that the exchanges are already in the process of understanding the nuances and operating conditions in India. They are especially focused on the due diligence steps required in acquiring exchanges and running them from foreign lands. However, there is also a second approach to building a presence in India - simply setting up a subsidiary in the country and running it.
The report came after Coinbase announced in March that it would be looking to hire new staff for its Indian subsidiary. In a March blog post, Coinbase explained that it was planning to house IT services in India, including software development, engineering, and customer support.
“India has long been known as a hub for engineering and technology innovation, and we look forward to finding that world-class talent to help the Coinbase group develop new ways for our customers to interact with the cryptoeconomy,” the blog post explained.
Of course, Coinbase wasn’t looking into just India. The company had been on an expansion spree, searching for talent in Japan, Singapore, the Philippines, Ireland, Canada, and the United Kingdom.
Not an Ideal Landing Spot at the Moment
The current situation in India just shows how much the country means to the crypto industry. As the second most populated country, India is a market that just can’t be lost - especially as China has now properly cracked down on the industry.
Still, it is worth understanding the state of things. Reuters reported that the country’s lawmakers are working on a bill that would criminalize the possession, mining, trading, and exchange of cryptocurrencies. If this is done, there might not be much hope for the industry in the country. But, Nirmala Sitharaman, the country’s finance minister, has stated that the government won’t shut the industry’s operations of.
“We will allow certain windows for people [to] use, so that experiments on the blockchain, Bitcoins or cryptocurrency [...] will have that [option] available for them,” she said in part while speaking with India Today.
It is also worth noting that many of the exchanges mulling a move into India might not have a soft landing at all. Reuters reported that crypto trading platforms in India are still finding it difficult to open accounts and do business with financial institutions. There is still no crypto ban in the country just yet, but banks are reportedly scared of violating any perceived policies from the Reserve Bank of India.
With banks not coming around, many of the exchanges are now considering partnering with payment processors both locally and internationally. But, even payment processors aren’t the ideal solution.
For one, their services are inadequate to handle the needs of India’s estimated 15 million crypto investors. Then, their operations risk a crackdown from the Reserve Bank as well. The institution could hit them with a sanction any day and force them to cut off their crypto-based clients.
Indians’ Crypto Hunger is Rising
All of this is a pretty grim situation, considering how much crypto activity is present in India. Last month, data from Chainalysis showed that investments in cryptocurrencies from India had jumped by a staggering 600 percent over the past year.
Crypto investments had increased in the middle of 2020, following the Reserve Bank lifting its restriction on banks from serving crypto companies. However, things hit the roof when the market bull run of last year began. With asset prices hitting all-time highs, nr investments jumped.
Chainalysis estimated that the total amount of money invested in crypto grew from about $900 million to $6.6 billion over the past year. The same company estimated that crypto investors in the country had risen to 15 million.
So, there is definitely an incentive for these exchanges to move into India and expand their operations. However, with the government uncertainty, this is a big gamble for sure.