India is one of the fastest-growing cryptocurrency markets in the world, according to a recent report by Coinpaprika and OKEx. The trend will likely continue as the government has recently made a u-turn by endorsing crypto operations.
Immigrants, Govt Policies Are Driving Cryptocurrency Market’s Growth in India
The report cites three main factors that are driving the crypto market – immigrants, finance, and government policies. The former two are supporting the demand side of the crypto space.
Many immigrants use cryptocurrencies for cross-border remittance and exchange of fiat currencies. The fact that India has the largest population outflow in the world is generating a huge demand for remittances to the country. Traditionally, the volume of remittances by Indian immigrants has been among the highest in the world, and many of them are now turning to cryptocurrencies .
Migrant remittance inflows in India (Source: knomad.org)
Many Indians are using Bitcoin, XRP, and other cryptocurrencies as cross-border payment channels to save on remittance fees as much as possible.
Besides remittances, Indians at home are using cryptocurrencies as a channel to convert rupees to the US dollar or other more stable fiat currencies. India is currently going through the worst recession in its history, which puts pressure on the local currency. The rupee has devalued against the US dollar and other fiat majors. In order to preserve their savings, many Indians would rather keep USD, but that’s often difficult considering the strict forex regulations.
In these circumstances, Bitcoin and other cryptocurrencies come to the rescue. Many Indians would convert their rupees to Bitcoin and then to USD via P2P trading platforms like Paxful or LocalBitcoins.
Government Friendlier to Crypto
Another factor that helps the crypto market expand at a rapid pace is that the Indian government has become friendlier to this emerging space. In March of this year, the Supreme Court nullified the central bank’s ban against cryptocurrency. Since then, volume figures on most cryptocurrency exchanges operating in India have surged.
Just recently, the Reserve Bank of India (RBI) clarified that it allows banks to provide accounts to crypto exchanges, companies, and traders.
The central bank has responded to an information request by Harish BV, a co-founder of local crypto exchange Unocoin.
Even though the Supreme Court lifted RBI’s ban on crypto-related businesses, uncertainties still persisted, as many banks didn’t know whether they could provide accounts for such clients. Some banks were still rejecting crypto businesses in early spring.
The RBI’s latest intervention brings more clarity by openly admitting that banks should not restrict crypto exchanges and other companies.