8 September 2023

Another uneventful week in crypto – sometimes feels that it is better this way especially in September where price action generally trends down.

Will this continue? If it does, a strong break in either way will eventuate.

Today, on our Hot Take, we focus on fiat ramps (especially INR ramps). Why is it becoming difficult globally to convert fiat currencies to crypto and vice versa? Why are the banks still resisting in spite of strong and growing demand? And what is the outlook leading into another crypto bull run?

Let’s dive in.

Top-3 stories of the week:

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2

3

The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $1.05 trillion - UP 0.1%

• Bitcoin price - $26,264 - UP 0.9%

• The dollar index (DXY) - 104.9 - UP 1.2%

• Bitcoin Dominance - 49.48% - UP 0.5%

• Crypto Fear and Greed Index - 46 - the market is in fear

ICO CALENDAR

• 10^th Sep - Virtual Versions (VV)

• 10^th Sep - NATURESGOLD TOKEN (NGOLD)

THE HOT TAKE

Top Indian banks are avoiding crypto – that will change soon

All the outset, we encourage all Indian investors and traders to:

• Use Indian exchanges for crypto trades: This helps in easy compliance as well as gives you the much-needed peace of mind post your transactions. INR on and off-ramps are tricky but some exchanges like Giottus have instant INR deposit and withdrawal options enabled that automates quick fund transfer without the need to get in touch with customer support.

• Avoid P2P transactions: If you are still engaging in P2P, today is a good time to stop it completely. Getting caught in the money loop while police investigations are undertaken is avoidable.

• Patiently wait for better INR solutions: There will be more clarity on the banking support extended to us by early next year. We believe that support will be extended in phases but will generally be positive in nature.

We elucidate the points below.

Until 2020, global banks didn’t have much of a stance in the growing field of crypto – a lot of transactions passed smoothly. The 2021 bull market and the subsequent drop in value has spooked regulators who have come hard on banks to ensure a risk-based approach to customers transferring fiat to crypto exchanges. Their reasoning – if fiat movement is restricted or monitored, investors will shy away from crypto. Banks on their part didn’t want to be caught in this – why take the pain of monitoring and get penalized on repercussions that is not really their main business? Some banks have taken decisive action like CBA in Australia.

In India, it has not been a smooth sailing since 2018 when RBI stopped banks from dealing with crypto. This was overturned by Supreme Court in 2020 and made our lives easier. What has happened since? Will positive regulations earn banks’ trust in crypto?

1) Key UPI support was withdrawn in 2022

We all know that India loves and embraces UPI. Digital public goods such as UPI are proving to be game-changers in bringing technology to the masses as well as increasing competition in the industry. According to NPCI, close to INR99,000 crore of transactions have been through UPI this year. However, when it comes to accessing crypto, UPI is still a no-go.

In April 2022, Coinbase’s public announcement of use of UPI as on-ramp led to NCPI washing their hands off crypto in India.

2) Rise of P2P and scams

The absence of clarity and constant hurdles regarding banking support led Indian investors to adopt P2P (peer-to-peer) transfer in foreign exchanges. While it worked well for a while, fraudsters used this method to bring in foreign capital to finance illegal activities. The ED and police departments have cracked down hard on such activities in recent past. While this is great for the ecosystem, it has also affected naïve traders whose bank accounts (and their friend’s/family’s) are frozen in an attempt to recoup the money. Unfreezing bank accounts involves travel to concerned police jurisdiction, which can be anywhere in India, and proving their innocence. Not every retail trader can afford to do this.

3) Remigration to Indian crypto exchanges

Traders and investors have remigrated their trades to Indian exchange platforms which are also compliant with regards to taxation laws and KYC norms of the country. We also observe a strong trend of compliance among users in terms of tax declarations.

However, not all exchanges have an easy on and off-ramp solution to convert INR to crypto and vice versa. INR deposits can take hours or even days to process given lags in traditional banking. Customer support executives often have to resolve issues which is an added step and hassle for most investors.

4) CBDCs can resolve this; aided by regulations

Globally, more than 130 countries are experimenting with CBDCs (Central Bank Digital Currency) with 32 markets either launched or in pilot stage. More pertinently, 19 of the G20 countries are in an advanced stage of CBDC development. eRupee, RBI’s CBDC, can enhance banking in the India much like UPI. CBDCs have an inherent role to play in banking sector’s future as explained by McKinsey. They can also be used to accurately track money flow in their domain.

In terms of regulation, the G20 members are focusing on creating a unified regulatory approach to crypto assets. India, during its presidency, has emphasized the importance of global cooperation in regulating the crypto sector. This week, the IMF and Financial Stability Board (FSB) have come up with key recommendations to navigate crypto among G20 countries. They have clearly stated that crypto can’t be banned but instead must be regulated well.

If this is discussed and passed in the G20 summit in New Delhi this week, a clear crypto roadmap will be established in the country. This will encourage the RBI and the banks to support crypto exchange platforms (also called Virtual Asset Service Providers or VASPs). RBI may choose to do this by expanding the eRupee use case list as well.

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Disclaimer: Crypto-asset or VDA investments are subject to market risks such as volatility and have no guaranteed returns. Please do our own research before investing and seek independent legal/financial advice if you are unsure about the investments.