What is cryptocurrency?
A digital payment method known as cryptocurrency eliminates the requirement for bank verification of transactions. Anybody can give and receive money using this peer-to-peer method. Bitcoin payments are not based on anything tangible, they are digital inputs to an internet database containing information about certain transactions, not actual currency. Your bitcoin transactions are tracked on a public ledger. Cryptocurrencies are stored in digital wallets.
The term "cryptocurrency" originated from cryptography. This suggests that the storage and transfer of bitcoin data between wallets and to public ledgers require specialised coding. The purpose of encryption is to ensure safety and security.
Bitcoin was established in 2009 and is currently the most well-known cryptocurrency. The primary motivation for interest in cryptocurrencies is trading them for profit; on occasion, however, speculators manipulate prices to extremely high levels.
How does cryptocurrency work?
A decentralised public ledger known as the blockchain, which records every transaction and is owned by the cryptocurrency's holders, is home to thousands different cryptocurrencie.
A procedure known as mining is used to manufacture bitcoin units, It is utilising computer power to produce coins by solving challenging mathematical puzzles. Additionally, users can purchase the currencies via brokers, store them in encrypted wallets, and use them.
Owning cryptocurrency means you have nothing material. You can transfer a record or unit of measurement from one person to another without depending on another using a key that you hold.
Even though Bitcoin was first introduced in 2009, Cryptocurrencies and blockchain applications are still in their infancy, but additional applications are expected in the near future. The trading of financial assets like stocks, bonds, and other securities may one day be done by technology.
Cryptocurrency examples
Numerous cryptocurrency exist in the thousands. Among the most well known are :
Bitcoin:
Bitcoin was the first cryptocurrency and is now the most traded, having been founded in 2009. The creator of the currency, Satoshi Nakamoto, is generally accepted to have used a pseudonym to refer to a person or group of persons whose true identity is still unknown..
Ethereum:
Ethereum is a blockchain platform that was created in 2015 and has its own cryptocurrency known as Ether (ETH) or Ethereum. After Bitcoin, it is the most well-known cryptocurrency..
Litecoin:
The most striking similarity between this money and bitcoin is how quickly new developments have been developed, such as quicker payment processing and expanded transaction limits.
Ripple:
Founded in 2012, Ripple is a distributed ledger technology. Not just cryptocurrency transactions but also other types of transactions can be tracked using ripple. The business that created it has collaborated with a number of banks and financial organisations.
To differentiate non-Bitcoin cryptocurrencies from the original ones, they are all referred to as "altcoins.".
How to buy cryptocurrency
Perhaps you're wondering how to securely purchase cryptocurrencies. Usually, there are three steps to it. These are:
Step 1: Choosing a platform
Making a platform decision is the first step. Typically, you have the option of using a specialised cryptocurrency exchange or a conventional broker:
- Traditional brokers. These are online brokers that provide services for buying and selling ETFs, stocks, bonds, and other financial assets in addition to cryptocurrencies. These platforms typically have fewer cryptocurrency functionality but lower trading costs..
- Cryptocurrency exchanges. There are numerous cryptocurrency exchanges available, and they all provide a variety of features like interest-bearing account options, wallet storage, and coin selections. A lot of exchanges have fees based on assets..
When contrasting various platforms, take into account the available cryptocurrencies, the fees associated with them, their security features, the choices for storage and withdrawal, and any available educational materials.
Step 2: Funding your account
The next step is to fund your account so you can start trading after selecting your platform. Although this varies by platform, the majority of cryptocurrency exchanges let users buy cryptocurrency with fiat (i.e., government-issued) currencies like the US Dollar, the British Pound, or the Euro using their debit or credit cards.
Credit card purchases of cryptocurrency are regarded as dangerous, and some exchanges do not allow them. Additionally, some credit card providers prohibit cryptocurrency transactions. This is due to the extreme volatility of cryptocurrencies, and it is not wise to take a chance on incurring debt for some assets or even paying hefty credit card transaction fees.
Additionally, wire transfers and ACH transactions are accepted on certain platforms. Each platform has different acceptable payment methods and processing times for deposits and withdrawals. The time it takes for deposits to settle also differs depending on the mode of payment.
Fees are a crucial consideration. These consist of trading costs in addition to possible transaction fees for deposits and withdrawals. Paying methods and platforms will have different fees, so it's best to do some preliminary study on these.
Step 3: Placing an order
You can use the web or mobile platform of your broker or exchange to make an order. If you want to acquire cryptocurrency, you can do so by clicking "buy," choose the type of order, entering the quantity you wish to buy, and finalising the transaction. The "sell" orders follow the same procedure..
Other options exist for investing in cryptocurrencies. These include online payment platforms that let users purchase, sell, and store cryptocurrencies, such as Venmo, Cash App, and PayPal. The following investment vehicles are also available:
- Bitcoin trusts: Shares of Bitcoin trusts can be purchased using a standard brokerage account. Through the stock market, these vehicles expose individual investors to cryptocurrency.
- Bitcoin mutual funds: There are Bitcoin mutual funds and exchange-traded funds (ETFs) available.
- Blockchain stocks or ETFs: You can also indirectly invest in crypto through blockchain companies that specialise in the technology behind crypto and crypto transactions. Alternatively, you might invest in stocks or exchange-traded funds (ETFs) of blockchain-related businesses.
How to store cryptocurrency
After buying bitcoin, you must store it securely to prevent theft or hacking. Crypto wallets, which are hardware or software applications that hold your private keys safely online, are typically where cryptocurrencies are kept. You can store directly through the platform with ease thanks to the wallet services offered by certain exchanges. But not every broker or exchange will offer you wallet services by default.
There are various wallet providers available. The phrases "cold wallet" and "hot wallet" are employed:
- Hot wallet storage: "Hot wallets" are cryptocurrency storage systems that encrypt your private keys using software that can be accessed online.
- Cold wallet storage: Cold wallets, sometimes referred to as hardware wallets, store your private keys safely using offline technological equipment, as opposed to hot wallets.
Hot wallets don't usually charge fees, whereas cold wallets usually do..
What can you buy with cryptocurrency?
The original goal of Bitcoin's debut was to serve as a medium for everyday transactions, enabling the purchase of anything from a computer to a cup of coffee to expensive goods like real estate. That hasn't exactly happened, and although more institutions are beginning to embrace cryptocurrencies, big cryptocurrency transactions are still uncommon. Nevertheless, a large range of goods can be purchased with cryptocurrency from e-commerce platforms. Here are a few instances:
Technology and e-commerce sites:
Many tech companies, like Microsoft, AT&T, and Newegg.com, accept cryptocurrency on their websites. One of the first online retailers to take Bitcoin was Overstock. It is also accepted by Home Depot, Rakuten, and Shopify.
Luxury goods:
Some premium retailers accept crypto as a form of payment. For instance, Bitdials, an online luxury shop, accepts Bitcoin in exchange for luxury watches like Patek Philippe, Rolex, and others.
Cars:
Numerous auto dealers, ranging from high-end luxury dealers to mass-market brands, currently accept cryptocurrencies as payment..
Insurance:
Swiss insurer AXA declared in April 2021 that it was now taking Bitcoin payments for all of its insurance products, with the exception of life insurance (because of legal concerns). Bitcoin can be used to pay premiums for house and vehicle insurance policies sold by Premier Shield Insurance in the United States.
Use a bitcoin debit card, like BitPay in the US, to make purchases with cryptocurrency at a store that does not immediately accept it.
Cryptocurrency fraud and cryptocurrency scams
Regrettably, there is an increase in bitcoin crime. Scams using cryptocurrency include:
Fake websites: Fraudulent websites with phoney endorsements and cryptocurrency lingo that promise enormous, assured returns as long as you keep investing.
Virtual Ponzi schemes: Criminals using cryptocurrency to launder money from new investors to pay off existing investors create the appearance of enormous profits on investments in virtual currencies that never exist. Before the perpetrators of one fraud, BitClub Network, were charged in December 2019, the scheme had raised almost $700 million.
"Celebrity" endorsements: Online scammers pretend to be billionaires or well-known individuals, promising to increase your investment in virtual currency; however, they actually take the money you send them. They might also spread false information about a well-known businessman endorsing a particular cryptocurrency through chat rooms or messaging apps. The scammers sell their investment when they have pushed up the price and enticed investors to buy, which causes the value of the currency to decline.
Romance scams: The FBI has issued a warning over a recent surge in online dating scams, in which con artists convince people they meet on social media or dating apps to trade or invest in virtual currencies. In the first seven months of 2021, the FBI's Internet Crime Complaint Centre received more than 1,800 reports of romance scams with a cryptocurrency theme, with losses totaling $133 million.
If not, criminals can create fake exchanges or assume the identity of authorised virtual currency merchants in order to deceive others into sending them money. Fraudulent sales presentations for cryptocurrency individual retirement accounts are another type of cryptocurrency scam. Then there is the more common form of cryptocurrency hacking, in which thieves breach users' digital wallets and take their virtual currency..
Is cryptocurrency safe?
Blockchain technology is typically used in the development of cryptocurrencies. Blockchain explains the process of grouping transactions into "blocks" and assigning a time stamp. Although it's a pretty sophisticated and involved procedure, the end product is a digital record of cryptocurrency transactions that is difficult for hackers to alter.
Furthermore, a two-factor authentication procedure is necessary for transactions. To begin a transaction, for example, you might be prompted to provide your username and password. Next, a code of authentication may need to be entered and texted to your personal cell phone.
Cryptocurrencies can still be hacked even with security measures in place. Numerous expensive attacks have severely harmed cryptocurrency startups. The largest cryptocurrency attacks of 2018 involved the loss of $534 million from Coincheck and $195 million from BitGrail due to hackers.
In contrast to money that is backed by the government, virtual currencies are solely determined by supply and demand. This may lead to erratic fluctuations that bring substantial profits or losses to investors. Furthermore, investments in cryptocurrencies are protected by considerably fewer regulations than those in more conventional financial instruments like stocks, bonds, and mutual funds.
Four tips to invest in cryptocurrency safely
All investments involve risk, according to Consumer Reports, but some experts believe that cryptocurrency is one of the riskier investing options available. If you intend to invest in cryptocurrency, these pointers will assist you in making wise decisions.
Research exchanges:
Learn about bitcoin exchanges before making an investment. There are reportedly more than 500 exchanges available. Before making a decision, do some research, read reviews, and consult with more seasoned investors.
Know how to store your digital currency:
You must store cryptocurrency if you purchase it. It can be stored in a digital wallet or on an exchange. Although wallets come in a variety of forms, each has advantages, technical needs, and security measures. Just as with exchanges, research your storage options before making a purchase..
Diversify your investments:
Any successful trading strategy must include diversification, and investing in cryptocurrencies is no exception. For example, don't invest all of your money in Bitcoin just because you are familiar with the brand. Spreading your investment over multiple currencies is a better alternative because there are thousands of options available.
Prepare for volatility:
Because of the extreme volatility of the cryptocurrency market, expect ups and downs. There will be significant fluctuations in costs. For those whose investing portfolio or mental health cannot support it, cryptocurrency may not be the best option.
Although cryptocurrency is very popular right now, keep in mind that it is still very new and is somewhat speculative. Be ready for the hurdles that come with making a new investment. If you want to take part, learn about it beforehand and begin with little investments.
surfing a thorough antivirus is one of the best methods to keep secure when surfing the internet. Kaspersky Internet Security uses bank-grade encryption to secure your online payments while guarding you against spyware, malware, and data theft.
Crypto
News and coverage of cryptocurrencies, including Bitcoin, Ethereum, and blockchain firms utilising NFTs and tokens to develop the web 3 and future of cryptocurrency.
India Standard Time on Saturday: Indian ISPs have started to block Binance and other apps that have been reported to be running "illegally" in the nation.
Not too long ago, venture capitalists from India were rushing to prove their expertise in cryptocurrency. Twitter profiles festooned with ENS addresses. Over a dozen venture capital companies hurried to release their web3 investment theses; some even lowered their strict hiring standards in order to hire analysts who were young and knowledgeable about cryptocurrencies.
Fearing that they might lose out on potentially game-changing deals, a number of younger partners persuaded higher-ups to approve investments at frothy $30-100 million valuations in early-stage cryptocurrency startups. They anticipated that cryptocurrency will become quite popular and looked to the developing world of digital assets to locate the next Flipkart or PhonePe. That month, the 200th cryptocurrency exchange proposal and the 33rd NFT marketplace idea were brought up in pitch sessions.
It made sense why everyone was excited. Globally, cryptocurrency was popular, and India's tech industry has been expanding. Major American investors all agreed that India's GDP would double by 2030. In the past ten years, Indian companies have already raised over $100 billion. Of course, international venture capital funds focused on cryptocurrency poured money into India in an attempt to repeat the successes Accel, Sequoia, and Lightspeed had achieved ten years earlier.
It seemed like the next natural step, what with crypto becoming mainstream. Bullish statistics claimed that over 100 million cryptocurrency users lived in India, while in actuality, significantly fewer of them used any kind of investment vehicle. Thousands of young engineers were drawn to hackathons by promises of huge salaries and a once-in-a-lifetime opportunities to reimagine the internet and financial markets.
Then the tide turned.
Prices for cryptocurrencies that were previously "headed to the moon" have now turned around and are heading towards the earth's centre. Addresses for ENS disappeared from Twitter bios. Businesses abandoned partially prepared essays about crypto. Partners redistributed analysts away from digital assets in order to concentrate on other industries.
However, in India, prices were just half the issue. Restrictive regulations implemented by the Reserve Bank of India, the country's central bank that has long resisted cryptocurrencies, have proven to be an equally difficult problem. Regulators continued equating cryptocurrencies with Ponzi schemes and exerted pressure on banks to avoid doing business with any cryptocurrency firms, even after a previous blanket ban was overturned in court..
This banking limitation has greatly complicated the onboarding of fiat currency in the absence of wider use of cryptocurrency. Coinbase swiftly gained knowledge following its CEO Brian Armstrong's successful 2022 debut in India, only to suspend trading a few days later because to the RBI's refusal to allow Coinbase to integrate with the crucial UPI payments network..
Trading volumes were further suppressed by new, stringent regulations such as a 30% tax on cryptocurrency transfers and a 1% TDS requirement on purchases of virtual assets. WazirX, an Indian exchange, processed over $43 billion in value in 2021; however, last year, its volumes dropped to just $1 billion..
Only a few months after bringing its helmet-shaped eyeball-scanning gadget to India, Brazil, and France, Worldcoin has discontinued its Orb-verification service in those countries. The organisation that manages Worldcoin development, Tools for Humanity, exclusively revealed to TechCrunch in a statement that it has brought the Orb to numerous markets this year for.
Governor of the Reserve Bank of India Shaktikanta Das said that the Indian regulator's stance has not changed when asked on Thursday what he thought of the U.S. SEC licencing spot bitcoin ETFs from BlackRock, Fidelity, Invesco, Franklin, and others.
At a conference on Thursday, he reiterated his concern that cryptocurrencies lack intrinsic value: "Our position, my position, and the RBI's position on this [cryptocurrencies] remains unchanged irrespective of who does what." "Travelling down that path will create huge risks that will be very difficult to contain going forward, for both advanced economies and emerging markets."
Apple appears to have put a stop to a terrible two years by removing a dozen international cryptocurrency apps from its Indian App Store. These apps were utilised by major dealers in India, partly because of their ability to evade taxes. For Indian cryptocurrency firms, a path filled with shutdowns, pivots, and international relocations comes to an end with the impending elimination throughout Google Play, internet providers, and beyond. Local business owners' hopes for web3 seem to have been shattered by the unforgiving regulatory pushback.
Some businesspeople are still fighting for the cryptocurrency dream in India, asking New Delhi to rethink the harsh 30% tax on cryptocurrency. However, it is evident from the tea leaves what is to come. Lawmakers are still laboriously refining their position; whereas the cryptocurrency community may be looking for WAGMI, India thinks the space is NGMI.
WazirX volume falls off a cliff amid India’s crypto scrutiny
Top Indian cryptocurrency exchange WazirX saw a $1 billion decline in trading volume in 2023 as a result of growing regulatory pressure in its own market and a global decline in the price of digital assets, including equities..
This year's total cryptocurrency trading volume on WazirX's platform was 90% less than that of 2022, when it reached $10 billion, and 97% less than that of 2021, when it was $43 billion.
In a public statement on Tuesday, WazirX, which has been at odds with Binance on the ownership of the Indian company, emphasised the $1 billion trade total, casting a positive light on the most recent statistics. However, the exchange refused to provide context for the figure by excluding the far higher levels observed in 2021 or even 2022, just before the sharp sell-off took hold, when the crypto mania was at its height.
The 97% decline in trading volume coincides with WazirX coming under increasing regulatory pressure from Indian authorities, which has left the once-thriving nation's cryptocurrency industry struggling to survive. India started taxing virtual currencies last year. Gains are subject to a 30% tax, and each cryptocurrency transaction is subject to a 1% deduction. Legislators in India have repeatedly commended Prime Minister Narendra Modi's leadership for shielding the country's residents from the cryptocurrency market scams and the sharp decline in asset values.
Earlier this year, the think tank Esya, located in New Delhi, revealed that some Indian traders were compelled to utilise overseas platforms such as Binance and Coinbase due to local taxation regulations. Later, Coinbase stopped accepting new users from India.
Local investors who were once eager to support the nation's cryptocurrency businesses are now wary of India's escalating regulatory crackdown on cryptocurrencies. According to persons with knowledge of the situation, venture capital firms are now extremely cautious about investing in the troubled sector due to the unfavourable climate, which Binance previously used as justification for its own reluctance regarding its own development into India.
According to persons familiar with the subject, many of the top India-focused venture capital firms that had ardently supported cryptocurrency companies only a year ago have subsequently made a decisive shift into other areas.
India central bank chief warns crypto will cause the next financial crisis if permitted to grow
The governor of the Indian central bank stated on Wednesday that the country is not at war with cryptocurrencies, but unless their use is outlawed, private cryptocurrencies would be the source of the next financial catastrophe..
In front of a crowded room of lawmakers and banking executives, RBI Governor Shaktikanta Das warned that cryptocurrency posed a serious threat to the country's socioeconomic stability. "I think we don't need to say anything more in light of the events of the past year, particularly the most recent FTX-related incident. Time has shown that cryptocurrency is worth what it is currently worth.
Any "product's" value fluctuation is a result of the market. Our primary problem with cryptocurrency, however, is that it lacks any basis at all, unlike any other asset or product. According to Das, the term "crypto" or "private cryptocurrency" is a trendy way to refer to an entirely speculative activity.
According to Das, the original goal behind cryptocurrency was to circumvent or disrupt the current financial system. They don't think there should be financial regulations or in the central bank. He continued, "I haven't heard a compelling case for the public good that cryptocurrency serves," expressing his belief that cryptocurrency ought to be outlawed.
"It ought to be outlawed because, if it is permitted to expand—let's say it is regulated and permitted to expand—then, believe me when I say that private cryptocurrencies will be the source of the next financial catastrophe."
India is one of the countries that has approached cryptocurrency regulation strictly. It started taxing virtual currencies earlier this year, with a 1% deduction on each transaction and a 30% tax on the gains.
The country's decision, combined with the market slump, has drastically reduced the volume of transactions that are processed in the country by local exchanges CoinSwitch Kuber, supported by Sequoia India and Andreessen Horowitz, and CoinDCX, supported by Pantera.
In a recent interview with TechCrunch, Changpeng "CZ" Zhao, the founder and CEO of Binance, the largest cryptocurrency exchange in the world, stated that the company does not perceive India as having a "very crypto-friendly environment." Although he said that tax laws usually take a long time to change, he stated that the company is making an effort to communicate its concerns to the local government over local taxes.
"Binance travels to nations with business-friendly and pro-crypto legislation. We don't travel to nations where we can't operate a viable business, or any business at all, he declared..
Coinbase, the company that has supported CoinDCX and CoinSwitch Kuber, introduced its cryptocurrency platform in the nation early this year but promptly withdrew the service due to concerns over regulations. Brian Armstrong, co-founder and CEO of Coinbase, stated in May that the company has deactivated Coinbase's support for UPI, a local payments system, "due to some informal pressure from the Reserve Bank of India," the country's central bank.”
With the thesis that finance as it exists today is cumbersome, wasteful, and slow, Crypto closed 2021. The way forward was through DAOs and Defi. In investment parlance, cryptocurrency prices were mooning and HODLing. Cryptocurrencies have lost two thirds of their value since May 2022. The ecosystem has collapsed because to the failure of certain companies, stated T. Rabi Sankar, RBI deputy governor, on Wednesday. Sankar previously compared cryptocurrencies to tulips and Ponzi schemes.
"The underlying philosophy of cryptocurrency, which was the technology that was heralded as the end of government, regulators, and intermediaries, is now desperately seeking to be regulated," he said. .
India’s crypto tax pushing traders to foreign exchanges
A recent report claims that due to India's tax regulations on cryptocurrencies, which went into force in April of last year, local exchanges have lost the majority of their market share to overseas competitors.
As of October 2022, Binance, Coinbase, and other international exchanges held 67.6% of the Indian cryptocurrency market, up from 50% in November 2021, according to New Delhi-based think tank Esya.
$3.8 billion of trade activity moved from local centralised exchanges to those run offshore between February 2022, when India announced its crypto taxation policy, and October 2022, according to the research (PDF).
Indian exchanges, like WazirX, CoinSwitch and CoinDCX, lost a stunning 81% of their trading volume in four months between July and October, Esya stated, attributing the downturn to the local TDS restrictions.
India is one of the countries that has approached cryptocurrencies with strict regulations. In April of last year, it started taxing virtual currencies, with a 30% gain tax and a 1% deduction for each cryptocurrency transaction.
According to the study, merchants are shifting to overseas exchanges in the hopes of hiding their operations from the local government. Peer-to-peer on- and off-ramp capabilities are provided by a number of international exchanges, such as Binance, which spares users from having to deal with businesses.
Furthermore, a lot of overseas exchanges, including KuCoin and Gate, permit cryptocurrency trading without requiring KYC information up to a specific capital limit, which is usually a few thousand dollars each day. By design, decentralised exchanges like dYdX don't need KYC. Top exchange officials in India have already issued warnings that customers may be forced to go to unregulated businesses due to the country's tax laws.
"These imply that India is losing out on scarce liquidity, which is important for concurrent economic value creation in the country, as well as on international competitiveness in the VDA (virtual digital asset) ecosystem, which is closely linked to several emerging technologies," Esya stated.
Crucially, it's unknown how the existing VDA design will affect tax collection for the government.
According to the research, the Indian government should reconsider its stance on cryptocurrency taxes and consider eliminating the 1% transaction-level deduction (TDS) fee.
The bulk of municipal officials continue to be among the most outspoken opponents of cryptocurrencies. The governor of the Indian central bank issued a warning last month, stating that unless their use is outlawed, private cryptocurrencies will be the cause of the next financial disaster.
The central bank announced last week that India will prioritise creating a framework for international regulation of decentralised finance, stablecoins, and unbacked crypto assets as part of its current G20 chair. It will also look at the "possibility of [their] prohibition."
Binance chief says crypto exchange doesn’t see viable business in India
In an effort to transform India, the second-largest internet market in the world, into a major web3 powerhouse, a plethora of venture capital firms with a focus on cryptocurrency have flocked to the country in the last two years. But what does India's potential mean in the eyes of Changpeng "CZ" Zhao, arguably the most powerful and influential person in the crypto industry? Not really much as of right now.
At the TechCrunch Crypto conference on Thursday, Zhao stated, "To be honest, I don't think India is a very crypto-friendly environment." With such a pessimistic outlook for the Indian market, Zhao is not alone. Although I have met with dozens of investors and startup entrepreneurs who have privately raised similar worries, Zhao's remarks stands out since no one else of her calibre has done so in public.
Zhao attributed the lack of viability of the market for multinational firms to the high tax environment in the nation. He declared, "There won't be that many transactions if you are going to tax 1% on each one." Indeed, consumers in India can access Binance, which is by far the biggest cryptocurrency exchange in the world in terms of volume.
"A user will lose about 70% of their money if they trade 50 times in a day. An exchange akin to an order book will not have any volume. Thus, we don't think that doing business in India today is viable. All we can do is wait. He continued, saying, "We are trying to put some logic there and are in conversation with a number of industry associations and influential people." He also added that levying a high tax on every transaction would lead to a decrease in overall tax accumulation.
"We're attempting to convey this message, but it usually takes a long time for tax laws to change," Zhao advised. "Binance travels to nations with business-friendly and pro-crypto legislation. We don't travel to nations where we won't be able to operate a sustainable business, or any business at all.
Zhao played off any worries that the company's prospects in India are being diminished because to the tumultuous negotiations over the partnership with the regional exchange WazirX.
India enforced a law earlier this year for taxing virtual currencies. It is taxing income from the transfer of any virtual assets at 30%. To capture details of all such crypto transactions, New Delhi is taking away a 1% tax deduction at the source on payments made related to the purchase of virtual assets.
The nation’s move, alongside the market downturn, has brutally wiped the transactions of local exchanges CoinSwitch Kuber, backed by Sequoia India and Andreessen Horowitz, and CoinDCX, backed by Pantera, observed on their platforms.
WazirX was processing volumes of about $500 million a day during the peak crypto bull cycle of last year. The figure had dropped below $5 million as of a month ago, according to a person with direct knowledge of the matter.
Other global exchanges have attempted to make a push in India. Coinbase, which has backed both CoinDCX and CoinSwitch Kuber, launched its crypto platform in the country earlier this year but quickly rolled back the serviceamid a regulatory scare.
Coinbase co-founder and chief executive Brian Armstrong said in May that the firm disabled Coinbase’s support for local payments infra UPI “because of some informal pressure from the [central bank] Reserve Bank of India.”
Binance to terminate tech offerings to estranged India partner WazirX
Binance will stop offering its wallet and other tech services that it provided to WazirX, escalating tension with the Indian crypto exchange that it once sought to acquire.
The world’s largest crypto exchange cautioned on Friday that Zanmai, the firm that operates the WazirX exchange, has not fully withdrawn assets stored in the Binance wallets despite being made aware of the changing terms.
The escalation of the event has been prompted by what Binance asserts is Zanmai’s refusal to withdraw false narratives about its relationship with the larger firm.
“On 26 January 2023, we offered Zanmai a choice between retracting the false public statements (and continuing to use our services) or terminating the use of our wallet service. Since Zanmai has refused to clarify their misleading statements, Zanmai has till 3 February 2023 (23:59 UTC) to remove the funds from the accounts that they used for WazirX’s operations,” Binance wrote in a blog post.
Binance shook many in the crypto community in August last year when it revealed that it doesn’t own the India-based platform WazirX despite the two disclosing an acquisition years earlier.
Changpeng Zhao, founder and chief executive of Binance, said at the time that the company had been “trying to conclude the deal for the past few years,” but hasn’t completed the transaction yet citing “a few issues” that he declined to elaborate.
WazirX and its executives maintain that Binance has acquired the firm.
Binance says that its relationship with WazirX is limited to tech offerings and is not special. Binance has similar arrangements with “numerous other firms” that use Binance’s technology and infrastructure but independently run their businesses.
“The false and misleading narrative put forth to the public misrepresented Binance as maintaining control over WazirX users’ assets, user activity, and the platform’s operations,” Binance said Friday. “The reality, as we said time and time again, is that Binance provided Zanmai wallet services only as a tech solution for their operations of the WazirX exchange. Binance has never managed or controlled WazirX’s operations, including in relation to users’ assets and user activity.”
Binance said it has “invited” Zanmai as an exception to work out arrangements with the firm to withdraw any remaining assets after February 3 but whether such arrangements will materialize “ultimately lies with the Zanmai team.”
In a statement late Friday, a WazirX spokesperson said the firm has initiated the process of transferring assets to multi-sig wallets, which it expects to be fully completed within the next few hours. “Users can continue to trade, deposit & withdraw funds as usual. Your funds are safe with us,” the spokesperson added.
Direct customers of Binance are not impacted by the dispute between the firms, Binance said.
WazirX is one of the largest crypto exchanges in India. The firm processed over $10 billion worth of trades last year. Its dispute with Binance is only one of the headaches for the firm, which, like its local rivals CoinSwitch and CoinDCX, is also grappling with an increasingly hostile regulatory environment.
India’s tax rules on crypto, which went into effect last April, have resulted in local exchanges ceding the lion’s share of the market to those operated by foreign players, according to a report. Binance, Coinbase and other foreign exchanges commanded 67.6% of the crypto market share in India as of October 2022, up from 50% in November 2021, according to New Delhi-based think tank Esya.
All Indian exchanges have also seen trading volume on their platforms — their marquee business line — dwindle amid the new tax regime and ongoing market downturn.
Apple pulls Binance, Kraken, other crypto apps from India App Store
Apple has pulled apps of at least nine crypto exchanges, including Binance and Kraken, from its App Store in India, less than two weeks after most of these global firms were flagged for operating “illegally” in the country. Financial Intelligence Unit (FIU), an Indian government agency that scrutinizes financial transactions, late last month issued show cause notices to nine crypto firms and alleged that they weren’t compliant with India’s anti-money laundering rules.
FIU had asked India’s IT Ministry to block websites of all the nine services in India. Other exchanges whose apps have been pulled are Huobi, Gate.io, Bittrex, and Bitfinex. Bitstamp, another offending exchange named by the FIU, was still operational on App Store in India, though the eponymous app of OKX had also disappeared.
The apps are still listed on the Google Play Store in India and their websites are also still accessible in the country. Users who had already installed the apps on their devices can continue accessing them.
Apple didn’t respond to a request for comment. In a message Wednesday evening, Binance assured existing customers in India that their funds were safe.
“We are working hard to engage in constructive policy-making that seeks to benefit every user and all market participants,” the top crypto exchange wrote to customers. “We continue to bet big on India as a leading web3 market and we are exploring all avenues to establish a long-term sustainable business in India.”
Many Indian traders have switched to global cryptocurrency platforms in recent quarters in an apparent move to evade taxes. India began taxing virtual currencies last year, levying a 30% tax on the gains and a 1% deduction on each crypto transaction. India-based crypto exchanges, including a16z-backed CoinSwitch Kuber, B Capital-backed CoinDCX and former Binance partner WazirX, continue to require rigorous know-your-customer verifications before onboarding new users, but the same hasn’t been true of many global platforms. (Trading volume on WazirX has dropped by a staggering 97% in two years partly because many traders have moved to global apps.)
“CoinSwitch and CoinSwitch PRO, as well as several other Indian VDA exchanges, are already compliant with India’s PMLA requirements for VASPs, and there is no reason why offshore exchanges shouldn’t do the same, should they wish to do business in India,” Ashish Singhal, co-founder and chief executive of CoinSwitch, wrote on X. “Offshore exchanges should actively consider registering with the FIU-IND and comply with India’s AML and CFT measures. This is also better for consumer protection in India since there will be greater regulatory oversight of the ecosystem.”
The Indian cryptocurrency exchanges CoinDCX and CoinSwitch Kuber had previously cautioned the New Delhi government that its new taxation policy on crypto would lead many users to shift to decentralized exchanges or seek out noncompliant services. On Tuesday, CoinDCX announced that it would provide rewards to customers who transfer their crypto assets from global exchanges to its India-based platform.
India has historically taken a tough stance on cryptocurrencies and the companies that enable their trading. The Reserve Bank of India implemented a ban on cryptocurrencies in the country about five years ago. While this ban was eventually struck down by India’s Supreme Court, the central bank has persisted in advocating for outlawing crypto since then and its top officials have likened the virtual digital assets to a Ponzi scheme.
Coinbase, another popular global crypto exchange, stopped onboarding new customers in India last year. Coinbase chief executive Brian Armstrong alleged in 2022 that the firm was facing “informal pressure” from the central bank in India.