India now has a full and compliant bitcoin exchange called BTCXIndia – also featuring a live trading platform and wallet service – which launched officially on 5th May in the southern city of Hyderabad.
It’s a significant step for the country’s bitcoin economy as its previous exchanges, some of which operated as fixed-price buy-sell platforms, lived with a degree of regulatory uncertainty since a series of government warnings and raids on bitcoin businesses in December and January.
BTCXIndia CEO Mupparaju Siva Kameswara Rao is Managing Director of S Capital Solutions Pvt Ltd – the company behind the new exchange. The main objective, said Rao, is first to educate Indian customers about digital currencies and then to provide them with a secure, transparent and compliant trading platform.
Rao is also happy with the response he’s received so far and expects trade to pick up quickly if new sign-ups continue at the current rate, he added.
Security and compliance
BTCXIndia currently has 10 staff members, working in development, customer services and compliance. Investment comes via a UK company that has funded the exchange for at least one year, and is also working as a strategic advisor to the management team.
Rao said the management team itself consists of a Tech Lead from India’s Institute of Electronics and Telecommunication Engineers, and a Compliance Officer from the financial services industry.
BTCXIndia keeps the absolute majority of the coins it holds in cold offline storage, and is also working on a proof-of-reserves implementation and “other interesting features” to reassure customers their funds are always 100% safe.
Rao added that the security measures are necessary to counter the “poor track record of the exchange industry in the past,” referring not to India but bitcoin exchanges worldwide.
In India, too, there is a particular need for a cautious approach thanks to government uncertainty, he said, explaining:
“It is clear that using bitcoins and trading bitcoins is not illegal in India, but it is still unclear who regulates it and what requirements the government will have on exchanges.
With that in mind, we have taken the approach of self-regulation, and are following know-your-customer procedures and anti-money laundering guidelines at par with similar requirements imposed on regulated financial institutions. In this way we make sure that we know whom we are dealing in all cases, in order to prevent illicit usage.”
Bangalore-based exchange Unocoin launched in December 2013 during that city’s first bitcoin conference, saying it intended to be fully compliant with customer verification procedures and other regulations.
On 24th December, however, the Reserve Bank of India (RBI) issued a warning that Unocoin and others like it were operating without approval, causing the exchanges to cease all services as a precaution. Ahmedabad’s Buysellbitco.in was raided and information service CoinMonk received a visit from tax officials seeking more information.
In January, bitcoin enthusiast Venugopal Badaravada made a representation for clarification on bitcoin policy to the RBI through a lawyer. His ‘deadline’ of 7th January passed without a response and, as of May, the central bank has still not issued any further policy statements.
However, Indian Finance Minister P. Chidambaram said in February:
“The RBI is presently examining the issues associated with the usage, holding and trading of virtual currencies, including bitcoins, under the extant legal and regulatory framework of the country, including foreign exchange and payment systems laws and regulations.”
BTCXIndia’s Rao added that the Prime Minister’s office had recently approved 100 million Indian rupees ($1.7m) in funding for a top Hyderabad based crypto-research institute for the study of cryptographic technology and currencies.
Next big thing
In December, the bitcoin community turned to India as its next great hope after Chinese government statements caused the price to drop from its record high of $1,200. India is an emerging economy with a population of over a billion people, nearly half of whom are unbanked or under-served by banks.
It also receives around $70bn in overseas remittances per year, making up 4% of its GDP. Together with its roughly 250m Internet users and a proclivity for high-tech industry, India would seem perfect for the introduction of a breakthrough financial technology like bitcoin.
With some regulatory clarity and reliable services, India may yet fulfil that promise.