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India’s regressive stance on crypto

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Satoshi&Co Daily Crypto Newsletter

July 23 · Issue #214 · View online
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The break down
The Indian Department of Economic Affairs published a comprehensive report on virtual currencies and recommended actions. Before we summarize our take on the committee’s report and its recommended actions, we wanted to highlight the key talking points from the report. 

  1. The committee views Distributed Ledger Technology (DLT), the foundational block for almost all blockchain projects and cryptocurrencies, in a positive light and aptly acknowledges the immutability and decentralization aspects of DLT as being value-additive in areas such as trade finance, mortgage settlement, etc. 
  2. The committee expressed its concern over the proliferation of cryptocurrencies. In its view, private cryptocurrencies (non-sovereign cryptos) do not have an intrinsic value and lack the attributes required for them to function as a real currency. The report also alluded to the extreme volatility in the prices of cryptocurrencies and cited that as a reason why it would not replace traditional fiat currencies. 
  3. The Committee endorsed the stand taken by the RBI (Reserve Bank of India) to ring fence institutions regulated by the RBI from cryptocurrencies, thus perpetuating the effective ban on fiat on-ramps. The Committee also recommends that all exchanges, people, traders and other financial system participants should be prohibited from dealing with cryptocurrencies.
  4. While expressing concerns over the legitimacy of non-sovereign cryptocurrencies, the committee has an open mind regarding the launch of a digital sovereign currency (digital rupee).
  5. The committee recommended that various regulators examine the utility of DLT to improve the efficiency of and to determine fraudulent activities in many processes such as cross-border payments, low-cost KYC, land management system, etc.   
Our view
We were hopeful that the regulator would take a slightly more progressive stance, for reasons that we had laid out in a recent Op Ed in the Economic Times, a leading Indian business daily. However, those hopes were put to rest with the current ruling.
Silver lining here, and it is a slim sliver of a silver lining - you can’t price uncertainty, but you can price risk. This clarification in the policy framework lays out at least in the near term what the prospects are going to be for crypto ecosystem stake holders in India. Also it is important to recognize that given the unique context that the Indian policy makers are in - fears around national security owing to the unique geopolitics, and potential political backlash around crypto black swan events, are going to be front and centre, irrespective of whether such extreme caution is warranted or not. This is what it is, we have to accept reality and move forward from here. We sincerely hope that the regulator will use this as a starting point for a debate, rather than as a final document, so that this evolves in a constructive fashion going forward. 
There is enough language in the document to suggest that the regulator is in fact aware of this, and is indeed open to at least listening to industry and investor feedback, even if not necessarily prone to immediately acting upon it. Again, maybe clutching at straws here, but like with the Libra congressional hearings, the team of policy makers and regulators have really done their homework, and the document seems to indicate a surprisingly good understanding of the inner workings of DLT and blockchain and cryptocurrencies, especially for regulators. 
Our earlier views on one dynamic are worth repeating. At the risk of generalizing, within these decision making bodies, the older generation, in the 50s and 60s typically struggle to come to terms with cryptocurrency, and though they might be in the minority, they have the deciding votes. It will take time to change these views, but change they will, and change they must, for reasons that we will dive into in tomorrow’s edition.
Meanwhile in Crypto Wonderland....
“India Expected To Ban Cryptocurrencies”
In a setback for cryptocurrency enthusiasts and start ups, India seems all set to ban private cryptocurrencies after an inter-ministerial committee (IMC) suggested outlawing private cryptocurrencies like Bitcoin, apart from declaring any activities related to virtual currencies as a criminal act. The report lays down that all private cryptocurrencies except the ones issued by the state be banned in India and endorses the stand taken by the RBI to eliminate the interface of institutions regulated by the central bank from cryptocurrencies.
“Bitcoin Is Property”
Last week, Bitcoin (BTC) was legally recognized by a Chinese court, whereby it was concluded that the cryptocurrency should now be considered as digital property. The decision that the Hangzhou Internet Court made in a ruling was met with enthusiasm from some community members, who assumed that Bitcoin is now legal in the People’s Republic of China (PRC) — famously one of the harshest jurisdictions for digital currencies in the world — and that the local government might soon ease its pressure on Bitcoin. However, some experts are less confident to call it a regulatory thaw.
“RenrenBit To Raise $21 Million Through A Coin Offering”
RenrenBit, a China-based crypto peer-to-peer lending and wallet startup founded by well-known over-the-counter (OTC) trader Dong Zhao, has lined up commitments worth $21 million for its own token sale. The lending platform kicked off the sale of 21 million RRB tokens on Monday, each priced at 1 USDT, the dollar-pegged cryptocurrency issued by Tether. It’s yet another example of a notable Chinese crypto startup capitalizing on the craze of exchange platform tokens following the significant growth of Binance’s BNB. According to a notice posted on RenrenBit’s mobile app, the sale was fully subscribed within about four hours with all 21 million RRB spoken for. The firm allows a two-day window for investors who might have second thoughts to withdraw their orders so the eventual amount raised could vary.
“Genesis Posts A New Record In Crypto Loans”
Genesis Global Capital, the lending arm of institutional over-the-counter cryptocurrency trading firm Genesis Global Trading, continues to get bigger as loan origination growth hits a new record. The New York-based firm added $746 million of crypto loans in the second quarter, bringing its total originations to $2.3 billion since launching the business in March 2018, according to a Q2 lending snapshot report published Tuesday. The quarter-on-quarter growth hit 48% as compared to $1.53 billion in total originations as of March 2019. Moreover, Genesis’ portfolio of outstanding loans grew sharply by 149% to $452 million as of June 30, as compared to $181 million in the previous quarter.
Crypto Twitter Pick
Larry Cermak
This is getting quite serious. Let's summarize:

- Both BitMEX and Bitfinex are now investigated for servicing U.S. customers

- Bittrex and Poloniex started to geo-block tokens from the U.S.

- Binance pulled crypto-to-crypto trading out of the U.S. completely
What We Are Reading / Listening To
Overnight Performance of Top 10 Currencies
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