A month after India’s central bank banned regulated investors from facilitating cryptocurrency transactions, trading volumes have surged dramatically alongside a sharp rally in prices.
The lenders are positive that they can survive amid the banning of the local banks.
Exchange operators, investors and analysts say people are rushing to take advantage of a three-month window the Reserve Bank of India has given banks to sever ties with cryptocurrency traders and exchanges.
Getting in now enables investors to convert rupees into cryptocurrencies, which they can later swap for other coins via private trading platforms even after the central bank’s rules take hold.
“There is a positive sentiment in the industry that the government will not ban trading in cryptocurrencies, and even if formal banking channels cannot be used, people can move to crypto-crypto trading platforms,” Shivam Thakral, chief executive of BuyUcoin, a cryptocurrency exchange.
“New investors are coming to our exchanges while existing ones are regaining interest after the drop because they’re getting good value and are making money as the prices of cryptocurrencies move higher,” Thakral said.
Citing the market performance, prices of the volatile bitcoin in India are back up to 618,000 rupees ($9,270), recovering from a low of 350,001 rupees after the central bank’s announcement in early April.
According to Pune, India-based cryptocurrency exchange Coindelta, the average daily volumes have also seen a sharp recovery and were as high as $75 million, close to levels before the rule changes,
India’s government has taken a tough stance against the use of virtual currencies, fearing they could be used to finance illegal activities. The country’s finance minister said in February that they should be banned as a payment system.
But many investors hope the government will soften the central bank’s blow by regulating cryptocurrencies rather than banning them outright.
A panel with members from the central bank, the finance ministry and market regulator Securities and Exchange Board of India is expected to soon formulate a recommendation on what to do next.
“Unlike fiat currency, prices of virtual currencies are based on people’s beliefs and aspirations,” BuyUcoin’s Thakral said.
“The long-term vision for us and the people who are investing now is that cryptocurrencies are here to stay.”