At a time when the Narendra Modi
government’s decision to demonetise high-value currency notes has left Indians scrambling for alternative payment and investment options, the demand for new-age cryptocurrency options has seen a surge. For this and other reasons, Bitcoin, the largest and oldest of cryptocurrencies, is trading at a huge premium in the country.
The demand spike in India follows a similar trend in neighbouring China. In the past month, while the dollar strengthened, and the Chinese currency weakened to an eight-year low, the demand for Bitcoin
in China increased dramatically. Over this period, the price has surged over 25% to around $740 per Bitcoin
on major global exchanges.
On Indian exchanges, the Bitcoin
prices are being quoted at 25-28% higher than cost. The interest among people here has been fuelled mainly by the government's demonetisation
On November 8, the day Prime Minister Narendra Modi
announced that Rs 500 and Rs 1,000 banknotes would cease to be legal tender, Bitcoin
was priced at about Rs 52,000 on leading Bitcoin
trading exchanges Unocoin and Zebpay. On that day, the international cost of one Bitcoin, when converted into rupee, stood at Rs 46,942. So, the difference between the cost and trading quote came to about 10%. Compared with that, the trading price at present is at Rs 64,000, while the international price is around $740 (about Rs 51,000), a difference of over
Unocoin Chief Executive Officer Sathvik Vishwanath says: “The price of Bitcoin
is higher than the international price because there is high demand but limited supply for Bitcoin
among Indian traders.”
Sandeep Goyenka, CEO of Zebpay, India’s largest Bitcoin
exchange by volumes traded, says: “There is a surge in interest for Bitcoins. Indians are inquiring about Bitcoins as an alternative and safe investment option. They are downloading Zebpay as they want to experiment with digital currencies. There has been a 50% increase in Zebpay downloads.” Google search data show that Indians’ search for the keyword ‘Bitcoin’ was at its peak soon after demonetisation.
Sathvik adds: “It cannot be easily imported because of capital controls in India,” so the supply is always less than demand. But, his company Unocoin targets Indians abroad looking to send remittances home. The best way, he suggests, is to buy Bitcoin
on an international exchange and transfer it to India, where it can be immediately sold on a Bitcoin
exchange. The transfer can take place through blockchain, a transparent public ledger. The Indian receiver, while encashing it, gets a premium and all deals are done using the banking channel, with proper know-your customer records.