“But there is no point selling since we have held these for long and the market is right now at a loss.”
Patel is among millions of virtual currency investors who have been directly affected by the central bank’s order of April 5 when the RBI debarred banks and financial institutions from dealing in virtual currencies.
The regulator gave three months’ wiggle room for these entities to wind up these businesses.
While virtual currency exchanges in India keep silent about their strategy, traders on these exchanges are unwilling to liquidate their holdings just yet as they wait for the market to move up again, considering the deep losses the bitcoin market clocked across the world in the past two months.
The RBI directive proved opportune for a lot of traders who used the dip in bitcoin and other virtual currency prices to their advantage by buying even more and holding it in their private wallets rather than with local exchanges.
Though this is not the first time that the RBI has warned about the dangers of cryptocurrency ranging from anonymity, decentralisation to possible use in funding illegal activities and trade, the April 5 circular has sounded the death knell for Indian companies, experts say.
“There will be a rise in cash-out centres where people can exchange their bitcoin, and companies will probably now move to crypto-friendly countries such as Singapore,” said Raj Chowdhury, managing director, HashCash Consultants, a firm involved in virtual currency and blockchain-based international remittances.
Chowdhury said the mandate was not well thought out since bitcoin was a decentralised currency that could not be banned by any government since the ledger was present across the world on servers.
“The move will stifle innovation in the country and companies will look to move to greener pastures. The government will also move on crucial tax money that they could have earned by regulating the market,” he said.
Meanwhile, some traders have indeed panicked and transferred their bitcoin holdings from Indian exchanges to private wallets. For instance, an independent businessman in Bengaluru, who goes by the name Zvan, has transferred his holdings to a privately encrypted bitcoin wallet.
A private bitcoin wallet allows people to keep the key to their bitcoin with themselves, limiting the dependence on intermediaries. People like Zvan are looking to transfer their holdings to private wallets so that they can trade in bitcoin even if Indian exchanges disappear.
“I am not selling my holdings, no matter what the government thinks about bitcoin. I have bought a little more since the direction happened as prices dropped, but I am here for the long run,” said Zvan. “A virtual currency is not limited by regulations. There are always foreign exchanges where one can buy and sell. I can even liquidate these when I am outside the country.”
At least five more investors Business Standard spoke to expressed the same sentiment and detailed their exit strategy.
However, the move has slowed the pace of trades in the market.
Shivam Gupta, who belongs to Delhi and holds three virtual currencies, has stopped buying more and is looking to consolidate his holdings. Last year, he quit his public sector job to trade in bitcoin, but those plans are now endangered.
“People who entered the market in December cannot sell because they are running a loss of at least 60 per cent. And those who have been in the market for a long time know that it is a blip that can be overcome,” Gupta said. “I have my holdings intact, but I might have to get back on the job market if the ban on the Indian exchanges is not lifted.”
Chowdhury, meanwhile, said that it was unfortunate that the government had taken a stern view of the virtual currency market. “The bitcoin market in India is marred by regulation, which is ironic because the whole point of cryptocurrencies is to be free from regulation and decentralisation,” Chowdhury said.