India has been widely recognized as a market with huge potential for the cryptocurrency industry–millions of unbanked individuals, burgeoning penetration of mobile phone and internet usage, and a massive remittances market.
However, regulatory uncertainty and widespread reports surrounding proposed legislation that would effectively ban the use of crypto within the country has caused the nation of India to remain largely untouched by the global cryptocurrency market–until recently.
Indeed, in November, Malta-based cryptocurrency exchange Binance acquired WazirX, a peer-to-peer crypto trading platform that has grown to be India’s largest cryptocurrency exchange since its launch in March of 2018.
Recently, Finance Magnates spoke with Nischal Shetty, founder and CEO of WazirX, about the challenges and opportunities associated with operating a cryptocurrency business in India, as well as what Binance’s entry into India could mean for the future of crypto in the country.
WazirX aims to fill the holes in the Indian cryptocurrency ecosystem
Nischal began by explaining that “WazirX is a peer-to-peer exchange as well as a crypto-to-crypto exchange, so it’s an all-in-one platform built primarily for Indians. When we launched, it was only for Indians–now, we are international, but we launched with only Indian users in mind” Shetty explained. “You could start directly with fiat currency, buy crypto, and then continue to trade it and buy all sorts of cryptocurrencies.”
Nischal said that there were several reasons behind the decision to build WazirX. “Before WazirX, we had a few exchanges in India, but the user experience was not on par with other global products–that’s what we saw lacking in the ecosystem.”
“The second most important thing is that if you wanted to buy crypto in India (before WazirX), you had to pay at least 10-15% in premium,” Nischal explained, adding that the reason for this premium was the lack of a platform that was well-built and widely accessible to Indian users. He said that today, WazirX’s rates are the lowest for crypto in India
“It’s not a 0% premium,” he said. However, “it’s still usually in the 2-3% range, so it’s a massive shift.”
Building the right infrastructure
Nischal said that another source of inspiration behind the creation of WazirX was the lack of a cryptocurrency exchange for Indian users that had a dependable mobile application. “When you look at India as a [financial] market, India is very heavy on the mobile side of things,” rather than brick-and-mortar institutions, such as banks.
“India has, I think, skipped the tech-stop revolution and moved directly to the mobile revolution. Everyone has a mobile phone here,” he continued. “At the time when we were launching, you’ll be surprised to know that there was no [exchange] that had mobile apps on both platforms–either they had it on iOS or Android, and these were all buggy, with really low ratings.”
Entire global Crypto ecosystem is very excited about India! Definitely because we have over a Billion people and some of the smartest talent in the country.
— Nischal (WazirX) ⚡️ (@NischalShetty) November 21, 2019
“So, we focused primarily on mobile phones as our primary user interface, and everything was focused on mobile. And [with] that, I’m happy to say that we are the top-rated app in India, with about [a] 4.4-4.5 rating,’ Nischal said, continuing to say that WazirX’s crypto exchange app is also the most-downloaded exchange app in India.
“There can only be one anonymous person that we all trust, and that’s Satoshi.”
“This is all organic, by the way,” he added. “We haven’t spent any money on marketing or ‘buying users’ or anything like that. It’s just word of mouth.”
Nischal said that transparency and trust was another “not-so-secret” ingredient that helped to bring new users into the ecosystem. “When you’re going to buy crypto from an exchange, you’d rather know what that exchange is all about, who the people are–and that was something that was really missing from the Indian ecosystem.”
Nischal explained that as WazirX’s founder and CEO, he has put himself at the front of this effort towards building trust and connecting with users through personal and product branding.
— Nischal (WazirX) ⚡️ (@NischalShetty) November 21, 2019
“If you look at my profile, I have been very active online talking to people, telling them what we are building…the way to [establish] trust is to be very open about what you do, who you are, and who the people [involved] are.”
“I believe in crypto,” he added. However, “there can only be one anonymous person that we all trust, and that’s Satoshi. Apart from that, I don’t think we should be trusting anyone anonymous.”
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On crypto regulation in India: “you do not know what’s going to happen tomorrow.”
We asked Nischal what it has been like to operate a cryptocurrency exchange in Indian given the regulatory uncertainty that has been present in the market there over the last several years. Earlier this year, reports of a proposed bill that would sentence crypto users to 10 years in prison circulated through crypto news media.
As a result of this regulatory uncertainty, a number of Indian cryptocurrency exchanges, including Crypto Kart and Koinex, have shut down over the last year.
How has WazirX been coping? Nischal said that since WazirX launched in March 2018, “it’s a very interesting thing–it’s like you do not know what’s going to happen tomorrow.”
Nischal explained that prior to the launch of WazirX, “things were always really ok in India” in terms of crypto regulation. “There were always these rumors that there might be a ban or things might go sideways, but when we launched, there was banking access available for all the exchanges, so you could create a bank account, accept fiat deposit, process withdrawals–you could do all of that.”
Surviving the end of banking for crypto exchanges in India
However, in April of 2018–just four weeks after WazirX’s launch–”the Reserve Bank of India issued a circular to all the banks that are under them (which is practically every bank in India)–stating that none of the banks should have any working relationship with any crypto-related business.”
“So, that was when all of the excitement started in India–all of the banks were given three months to [end] their working relationships with all exchanges.” WazirX, along with every other cryptocurrency exchange, lost their bank accounts.
“During these three months, every exchange…was worried about what [they] would do next. Because, as an exchange, one of the most important aspects [of business] is how to get people to buy crypto with their fiat currency,” Nischal said.
Rolling with the regulatory punches
“So, everyone was facing this issue–some decided not to do anything,” hoping that the worst had passed. “However, we decided to build a peer-to-peer [platform]. Because we said, ‘alright, the problem at hand is that we cannot have a bank account–but that doesn’t mean that our users don’t have bank accounts.”
WazirX went onto create a three-party system where “we, as an exchange, will escrow the crypto, and make the buyer transfer the money directly into the seller’s bank account, not to our bank account.” Nsichal said that as the first peer-to-peer crypto exchange in India, the platform attracted a large number of new users.
Today we reveal the most legal way to deal with cryptos in India after RBI restriction comes into effect. Do share it and help spread the word! https://t.co/upZk4iN7A3#blockchain #cryptocurrency #isupportcrypto
— Nischal (WazirX) ⚡️ (@NischalShetty) June 27, 2018
“The important factor here to understand is that regulation–not just in India, but in the whole crypto ecosystem if you look at it globally–regulations will always play a very different kind of a hand on you. And you, as a business working in crypto, will have to figure out how to navigate it.”
Setting the record straight: crypto is not illegal in India
“If you look at it from a country’s point of view, regulations are not clear in the space–no one has made a [blueprint] that other countries can copy. So, everywhere, companies are going to have to navigate,” Nischal said, “which we did, by bringing in peer-to-peer.”
Nischal said that along with a number of other cryptocurrency exchanges, WazirX is currently working on appealing RBI’s decision not to allow banks to have working relationships with cryptocurrency exchanges.
Additionally, for all of the media reports around the Indian government’s allegedly bearish attitude toward cryptocurrency–including the proposed crypto ban bill that would hand out 10-year jail sentences for crypto users–not much has happened on a legislative level.
“But, to set the record straight on the issue…Bitcoin and crypto trading in India is not illegal. It is not illegal for you to hold crypto, sell crypto, or do anything with crypto, because the government has never come up with anything negative or positive. It’s on more of a neutral ground,” Nischal said.
Is India crypto’s land of opportunity?
Therefore, “there’s a lot of opportunity” for the cryptocurrency industry to grow in India. Malta-based cryptocurrency exchange Binance has certainly taken note of this–the exchange, which is one of the largest in the world, acquired WazirX last month as an apparent sort of “first step” into Indian markets.
— Nischal (WazirX) ⚡️ (@NischalShetty) November 26, 2019
“If you look at the adoption of crypto in India, the first opportunity that exists is [banking] the unbanked,” Nischal said. “There are 300 to 400 million people in this country–or even more–who do not have a bank account today.”
He explained that the reason for this is that “banks have to have physical infrastructure built in every city, every village, every locality in India in order for people to get a bank account. But if you look at the penetration of mobile phones and the internet in India, we have over 500 million people already online–people in every part of India.”
“So, instead of banks having to build physical infrastructure, I see banks as a raid adoption mechanism for bringing the unbanked online into the online financial ecosystem.”
However, “we definitely need some positive regulations for any company to work in this aspect, but as of when that happens, I’m pretty sure that banking the unbanked is going to be a big thing in India.”
Nischal said that WazirX doesn’t have any definite plans to explore banking the unbanked as of yet. However, “mow that we are part of Binance–if you look at Binance, it’s turning into an ecosystem of crypto-related activities. I think that in a way, that’s probably the bank of the future.”
— Nischal (WazirX) ⚡️ (@NischalShetty) November 27, 2019