Indian crypto trade booms amid shift from gold despite proposed ban

The cryptocurrency aficionados’ mantra that bitcoin is equivalent to digital gold is winning converts among the world’s biggest holders of the precious metal.

In India, where households own more than 25,000 tonnes of gold, investments in crypto grew from about $200m to nearly $40bn in the past year, according to Chainalysis. That is despite outright hostility towards the asset class from the central bank and a proposed trading ban.

Richi Sood, a 32-year-old entrepreneur is one of those who swerved from gold to crypto. Since December, she has put in just more than 1-million rupees — some of it borrowed from her father — into bitcoin, dogecoin and ether.

And she has been fortunate with her timing. She cashed out part of her position when bitcoin smashed through $50,000 in February and bought back in after the recent tumble, allowing her to fund the overseas expansion of her education start-up Study Mate India.

“I’d rather put my money in crypto than gold,” Sood said. “Crypto is more transparent than gold or property and returns are more in a short period of time.”

She is part of a growing number of Indians — now totalling more than 15-million — buying and selling digital coins. That is catching up with the 23-million traders of these assets in the US and compares with just 2.3-million in the UK.

Very simple

The growth in India is coming from the 18-35 year old cohort, says the co-founder of India’s first cryptocurrency exchange. Latest World Gold Council data indicated Indian adults under age 34 have less appetite for gold than older consumers.

“They find it far easier to invest in crypto than gold because the process is very simple,” said Sandeep Goenka, who cofounded ZebPay and spent years representing the industry in discussions with the government on regulation. “You go online, you can buy crypto, you don’t have to verify it, unlike gold.”

One of the biggest barriers preventing wider adoption is the regulatory uncertainty. Last year, the Supreme Court quashed a 2018 rule banning crypto trading by banking entities, resulting in a trading surge.

However, authorities show no signs of embracing cryptocurrencies. The nation’s central bank says it has “major concerns” about the asset class and six months ago the Indian government proposed a ban on trading in digital coins — though it has been silent on the topic since.

“I am flying blind,” said Sood. “I have a risk-taking appetite, so I’m willing to take a risk of a ban.”

It is not the only country where regulators are cracking down. The UK’s financial watchdog has just banned Binance Markets from doing any regulated business in the country.

Contingency plans

The official hostility though means many bigger individual investors are reluctant to speak openly about their holdings. One banker Bloomberg spoke to who invested more than $1m into crypto assets said with no clear income tax rules he is concerned about the possibility of retrospective tax raids if he is publicly known to be a big-ticket crypto investor.

He already has contingency plans in place to move his trading to an offshore Singapore bank account if a ban was to be introduced.

To be sure, the value of Indian digital asset holdings remain a sliver of its gold market. Still, the growth is clear, especially in trading — daily trading on the four biggest crypto exchanges jumped to $102m from $10.6m a year ago, according to CoinGecko. The country’s $40bn market significantly trails China’s $161bn, according to Chainalysis.

For now, the increasing adoption is another sign of Indians’ willingness to take risk within a consumer finance sector that is plagued with examples of regulatory short falls.

“I think over time everyone is going to adopt it in every country,” said Keneth Alvares, 22, an independent digital marketer who has invested more than $1,300 in crypto so far. “Right now the whole thing is scary with regulation but it doesn’t worry me because I’m not planning to remove anything for now.”

Bloomberg News. More stories like this are available on bloomberg.com