Mapping out India’s Blockchain Ecosystem

This report was co-written by Coinpaprika & OKX. It aims to share insights from a global perspective on various new markets that are rapidly growing worldwide in terms of the trading volume. This report is part of a series focused on the India crypto market.

We attribute the driving force of the Indian cryptocurrency market development to three significant factors, namely immigrants, finance, and government policies. India is one of the fastest-growing crypto markets, gradually catching up on cryptocurrency development. It is expected that the global market share of crypto transactions in the Indian market will increase significantly in 2020-2022. It’s also worth noting that the competition between local and global major crypto exchanges in the Indian market will become increasingly fierce. Exchanges are expected to steer their focus on enhancing the stability of their derivatives products and offering more diverse depositing channels for users.

To summarize, this report aims to analyze the major parties involved in the development of the Indian crypto market, as well as short- and long-term problems they might encounter. We hope that this report can help you better understand the reasons behind the rapid development of the Indian crypto market.

India’s Large Remittance Demand Promotes the Use of Cryptocurrency.

Cryptocurrency has two major application demands in India. The first one is used as a cross-border remittance medium; the second is as a vehicle for conversion to more stable fiat currency. India is the world’s largest population outflow country, with more than 17 million immigrants in 2019, closely followed by Mexico and China.

India is a country with strong family bonding, and many immigrants have generated a strong demand for remittances to India. The amount of remittances by Indian immigrants has been the highest in the world over the years.

Global remittance fees are uneven. The high remittance fees in many African countries have raised the global average, resulting in an average remittance fee of USD 7.4. While India is around USD 6.82, slightly below the average, due to the massive demand for remittances in India, the remittance fees in India in 2019 were as high as USD 5.67 billion.

India’s Large Remittance Demand Promotes the Use of Bitcoin.

Using Bitcoin or other cryptocurrencies, such as XRP, as a cross-border payment medium, Indian can save a large number of remittance fees. Currently, Mexico is the second-largest migrant remittance country after India. Cryptocurrency transactions perform a very considerable volume of crossborder remittances between the Mexican Peso and the US Dollar. According to blockchain media The Block, as of 2020 Q1, cryptocurrency exchange Bitso has captured more than 2% of U.S. to Mexico remittance market, even Spanish banking giant Santander is now bringing its Ripple-powered payment solution to Mexico this year to catch the trend.

We believe that with the opening up of policies, India will be the next Mexico, and cryptocurrency as a cross-border payment medium will make a big difference in the Indian market. Due to great remittance demand, it will drive the prosperity of digital currency growth in India for a long time.

Cryptocurrency as a vehicle to convert Indian Rupee into other more stable fiat currencies.

The value of Indian Rupee is not stable, especially during the COVID-19 epidemic. The exchange rate between Rupee and USD continued to rise, causing the former to enter constant depreciation.

However, India has a great demand for the US dollar, such as online shopping on Amazon, Netflix subscriptions, etc. Whether it is due to Rupee preservation or consumer demand, with the constant depreciation of the rupee, the Indians have a strong need to convert their Rupee into a more stable fiat currency.

However, due to strict foreign exchange regulations, it is complicated to convert Rupee directly to US Dollars. Therefore, most Indians will choose to convert Rupee to Bitcoin and then to US Dollars through C2C trading platforms such as LocalBitcoins and Paxful.

As seen on the below chart, the C2C trading volume in India continued to rise, especially on Paxful. During the epidemic, the Rupee trading volume reached a new high. In addition to C2TC trading, many Rupees are exchanged to Bitcoin through chat groups, such as WhatsApp, Telegram, and Facebook, which then converted into US Dollars. To maintain their asset’s value, cryptocurrency is being used as a vehicle to convert Rupee into more stable fiat currency in India.

Note that political factors greatly influence this action. When the economy begins to move towards the freer and fairer markets, where Indians are allowed to exchange US Dollars freely, Bitcoin will become unnecessary for them. Moreover, whether cryptocurrency is used for cross-border payment or for conversion into a more stable legal currency, Indian is only using cryptocurrency as a medium. It does generate huge trading volume, but it does not mean that they will hold Bitcoin or other cryptocurrencies for a long time.

Loosened Policy Promotes Cryptocurrency Development in India

In addition to the above two demands, the loosening of government policies also helps promote the development of the Indian cryptocurrency market. Since March 4, 2020, the Supreme Court of India has struck off the Reserve Bank of India’s (RBI) banking ban against cryptocurrency, India’s overall cryptocurrency market has become prosperous again, especially reflected in the exchanges’ trading volume.

From the perspective of local exchanges in India, taking CoinDCX and WazirX as an example, we can see that from March 4, 2020, trading volume has been rising.

After the policy was loosened, the increase in trading volume was not only reflected in local exchanges, but also the major global exchanges.

According to data from Similarweb, during 2020 Q1, the website traffic of major exchanges from India has increased. Among them, OKEx‘s visits from India saw the highest increase, reaching 545.56%. According to OKEx, newly registered users from India rose 4100% during the same period. OKEX also revealed that they would launch a P2P trading platform in India soon, and Indian users will be able to buy Bitcoin、USDT and other cryptocurrencies with Indian Rupee via multiple payment channels. In addition, ranked second international exchange Kraken also announced that it would expand to the Indian market in 2020. It is foreseeable that the market competition in India will become increasingly fierce.

At present, the Indian cryptocurrency ecosystem is still under development and is gradually improving in terms of exchanges, media, and foundation.

In April 2018, the Central Bank of India issued a circular banning to regulate financial institutions from providing services to crypto businesses. Banks subsequently closed the accounts of crypto assets exchanges, causing extensive damage to the crypto industry. A few exchanges have closed down due to the banking restriction, such as Koinex, Coindelta, Coinome, and Zebpay. The remaining exchanges coped with the ban by launching C2C trading platforms, such as WazirX, Buyucoin, and Giottus.

Since March 2020, the Supreme Court of India has struck off the RBI banking ban against cryptocurrency, Many exchanges have reconnected bank deposits, some closed exchanges are restarting, and some new exchanges are going to open. Below are the existing exchanges in India.

WazirX

WazirX was founded in Feb 2014 and acquired by Binance in November 2019. WazirX is also one of the largest cryptocurrency local exchanges in India. It provides spot trading, including C2C and spot markets.

In addition, WazirX also provides help users convert fiat currencies to USDT, but there are limits on the conversion amount. Depending on users’ portfolio size, they can buy up to 3000 USDT in a single Buy Order.

In terms of deposit, users can deposit INR via UPI / IMPS / NEFT / RTGS.

Wazirx‘s average trading volume reached USD 2.8 million in April 2020, of which16% comes from BTC / INR; 14% comes from USDT / INR. As of today, WazirX is the largest local exchange in India.

Bitbns

Bitbns was founded in Dec 2017. It provides spot trading, including C2C and spot markets. It also offers margin trading with 1x leverage. In terms of deposit, Bitbns supports multiple deposit options, including UPI, BHIM, Tez, Paytm , Phonepe, NEFT / IMPS / RTGS. In April 2020, Bitbns’ average trading volume was close to USD 600,000. Among them, 51% comes from BTC / INR, and 39% comes from USDT / INR.

Coindcx

Coindcx was founded in April 2018 and is one of the largest cryptocurrency local exchanges in India. It provides spot trading, futures and margin trading. Among these, futures – known as DCXfutures – is powered by its strategic partnership OKEx, and in return for providing OKEx with a foothold in the Indian market. Using DCXfutures, Indians will be able to trade crypto derivatives. In terms of deposit, users can deposit INR via IMPS or UPI. If users haven’t completed KYC verifications, they could only deposit/withdraw up to 10,000 INR; KYC-verified users can deposit up to 1,00,000 INR & withdraw up to 2,00,000 INR.

Coindcx trading volume increased at the end of April 2020, with an average 24-hour trading volume maintained at USD 200,000. Among them, 85% of trading volume is contributed by BTC / INR.

ZebPay

ZebPay was founded in Oct 2014 and in Sep 2018, it announced the closure of operations, blaming it on the Indian government cryptocurrency regulations. In March 2020, ZebPay reopened in India. It provides spot trading, including the C2C market (INR＆AUD) and spot market. In terms of deposit, users can deposit INR via NEFT, RTGS, or IMPS. After the reopening, ZebPay trading volume growth has been strong and its average trading volume reached USD 1.2 million in April 2020, of which 73% comes from BTC / INR.

Other

Besides, there are many other cryptocurrency exchanges in India:

Summary

Multiple driving forces promoted the rapid development of Indian cryptocurrency market, including

India’s great remittance demand encourages the use of cryptocurrency;
Cryptocurrency as a means for converting Rupee to more stable fiat currencies;
Loosen government policy help to promote cryptocurrency market development in India.

Based on the above factors, the trading volume of Indian local exchanges, such as WazirX, CoinDCX, Zebpay, etc. have skyrocketed along with major global exchanges such as OKEx, Kraken, Bitstamp, etc.. The traffic from India also surged in the first quarter of 2020. It is foreseeable that the market competition in the country will become increasingly fierce in 2020.

But we can also see some short-term and long-term problems in the Indian market. In the short-term, due to the current absence of regulatory clarity, some banks continue to deny services to crypto exchanges. The cryptocurrency market needs clearer regulatory policies, including tax obligations. In the long-term, whether cryptocurrency is used for cross-border payment or for conversion into more stable legal currency, bitcoin has been being used there not as a store of value endpoint, but rather as a channel, so it will not be held for a long time. And it is also greatly influenced by political factors. That means when the economy moves towards a freer and fairer market, bitcoin is not longer necessary for Indians. But even as a utility token, the demand for bitcoin has greatly increased in countries where the fiat currency has depreciated significantly. We will continue to observe.