In February, when the Cryptocurrency Regulation Bill was listed in the Parliament, there was some panic selling. But since then, there has been a surge in trading.
What are the factors driving this growth?
Nischal Shetty, CEO and Founder of WazirX, talks in detail about the what is happening in the cryptocurrency space.
Edited excerpts:
Q: What are the reasons behind rise in trading in cryptocurrencies in India?
Nischal: There are many factors behind this surge. One of the biggest reasons has has been the drastic rise in the price of Bitcoin. The second is companies like PayPal are buying billions of Bitcoin. It has boosted confidence among people in cryptocurrency. Elon Musk tweeting about crypto and then Tesla buying Bitcoin worth $1.5 billion also has played a part in the popularity of cryptocurrency as an investment option.
Q: Apart from retail investors, institutional investors are also participating in this Bitcoin rally. When institutions buy Bitcoin, they buy it for a very long time. They lock it away in their balance sheet. So, what impact can it have on Bitcoin prices?
Nischal: It will have positive impact because the most important thing about Bitcoin that people love is the limited supply (only 21 million Bitcoin will ever exist). So, when large institutional players enter and they start buying, they do not sell for a long period of time. So they are cutting out the supply of Bitcoin in the market. So the supply being stable and someone eating into that supply, naturally, the price is going to appreciate. And that is what we are seeing playing out in the market, which is also the reason.
Q: What are Central Bank Digital Currencies? How are they different from cryptos?
Nischal: Let’s first classify the different types of crypto that exits. Broadly there are four types of cryptocurrencies. One is a cryptocurrency can be a currency. Just like your central bank a digital currency. It comes under the classification of a currency. The second type is it can be an asset. For example, Bitcoin is, seemed like an asset, like more like digital gold. The third, it can be a utility. The fourth is a security. So these are the four categories now. CBCD like INR comes under the first category, which is currency. And I think the benefits of that is going to be amazing and huge in India. For the simple fact that India has a large unbanked population.
What that means is there are not enough number of people probably 20-30% of them don’t have a bank account and a CBDC can be that solution where in spite of not having a bank account, they can join the digital economy. Because, you know, all you needed a mobile phone.
So I think it’s a great leap forward for India from a digital India point of view if CBDC like the INR digital comes into the picture. Look, if a Bitcoin is an asset and if a CBDC INR is a currency, they really do not have a competition because it’s two different reasons why people are going for each of these.
So I don’t see any competition to INR in the market. It’s going to be used as a currency in India and it will help the India push for digital India.
Q: What advice would you like to give to crypto lovers?
Nischal: I think one of the biggest thing is the current generation hasn’t really been part of something, which is so innovative and yet so early. So crypto is that opportunity for us to be the first early movers. And I think we should all grab this opportunity. It does seem to make sure that we can work and help the government to understand this technology and also regulate it in the right way. So we should not be too worried about the lack of regulation right now.
What we should do is educate ourselves and our friends and family so that everyone knows this is like Internet 2.0. I think we will be one of the top crypto nations in the next four to five years. So I think we should all just get into learning and understanding what this technology is.
