China announces cryptocurrency ban – what does it mean for India?, BFSI News, ET BFSI
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After the Chinese government declared all cryptocurrency transactions illegal, major currencies like Bitcoin and Ethereum tumbled on Friday and Saturday.
The ban makes it difficult for individuals to buy crypto, and could make it harder for companies to exchange it for yuan. This is the second crypto ban the country has declared, the first was in 2017.
Many crypto exchanges and providers were seen rushing to cut ties with Chinese users after the ban.
Shares in crypto-related firms fell on Monday, with crypto asset manager Huobi Tech plunging 23% and OKG Technology Holdings Ltd, a fintech company majority owned by Xu Mingxing and founder of cryptoexchange OKcoin, losing 12%.
China had recently announced that it would be launching its own digital currency. According to experts, the ban was likely because the government wants to remove competition for its digital yuan.
To worry.. or not to worry?
Bulls in crypto market are, however, using the fall in prices as a buying opportunity. “I’ll just keep buying more Bitcoin every time it dips,” said Jess Powell, chief executive officer of US crypto exchange Kraken, in an interview with Bloomberg.
According to Powell, every time China has banned Bitcoin, within 90 days the currency has bounced back much stronger than it was before.
Most experts suggest that the impact of the ban is a short-term one, and investors do not have to worry about the drop.
Furthermore, operations in the long run are unlikely to be affected because most Chinese Bitcoin mining companies had moved their operations to crypto-friendly countries in the first crackdown. China is the biggest player in bitcoin mining.
When the ban was announced, Indian exchanges dealing in such assets saw a rush to sell smaller crypto currencies, while veteran investors were relatively calm, according to reports. Some market participants believe that Indian crypto investors will be impacted the same way the global investor will be impacted.
While some believe that since every country has their own demand and supply, the crackdown creates no direct linkage to investment behaviour, even in India. However, some short-term nervousness in buying Bitcoins is likely in the near future on fears of other governments following suit.
With the ban, nearly 20% of the internet population will be out of the market, creating opportunity for India to further grow in the space. Industry players believe that the crackdown will serve as an opportunity for India to become a global leader in crypto.
As a result, every mining operation outside China, including India, benefits because their mining reward, which is proportional to their share of the global hash rate of the Bitcoin network, automatically rises.
Accordingly, a study by Nasscomm and cryptoexchange WazirX said the cryptotech industry in India can create an economic value addition of $184 billion by 2030.
The industry, which includes crypto applications in trading, payments, remittances, and retail among others, is estimated to have grown 39% CAGR in India in the past five years.
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