India has been ranked as the second-highest nation in terms of cryptocurrency trading volume per a survey published by Chainalysis in September 2023. Therefore, it is not a surprise to see that various cryptocurrency trading platforms are operating in the region.
Is It Possible to Trade Cryptocurrencies in India?
Consensus and YouGov also conducted a survey about cryptocurrency and Web 3.0. The report suggests that around 32% of Indian nationals purchased cryptocurrencies at one point. Meanwhile, around 21% of investors opted to HODL their digital assets.
However, the legislative environment in the region has not been historically friendly towards cryptocurrency investors. The government implemented 30% tax obligations on cryptocurrency investors.
Nevertheless, the adoption and trading volume of cryptocurrency transactions emanating from the region has continued to increase. Local cryptocurrency exchange KuCoin projects that by 2030, the digital asset market of India is expected to generate $241 million in revenues.
At the same time, data projections issued by the UN Economic and Social Commission for APAC have noted that around 68% of cryptocurrency investors hailing from India fall into the 15-64 age bracket. At the same time, the majority of trading interest comprises Bitcoin.
The article has also noted that centralized and decentralized trading platforms offer systemic investment plans (SIP), over-the-counter (OTC) markets, and peer-to-peer (P2P) exchanges.
Centralized Crypto Exchanges in India
As per business today.in there are around 28 licensed crypto exchanges operating in India as Virtual Asset Services Providers as of December 2023. Some of these firms are based locally while others are foreign firms opening offices in the region.
As per VASP licensing requirements, regulated platforms have to incorporate verification checks such as KYC and use phone and email addresses to create an account. The account confirmation checks are incorporated as a way to discourage illegal financial activities such as money laundering and identity theft.
There is an ease for Indian cryptocurrency investors with the availability of various online and digital payment options. At the same time, it is possible for investors to purchase cryptocurrencies from OTC or P2P trading platforms that are regulated. Most OTC forums have a minimum order limit.
On the other hand, P2P trading platforms allow investors to purchase Bitcoin at lower prices in comparison to spot trading. Investors can make private trading contracts for exchanging cryptocurrencies at an agreed-upon rate independent of the market prices.
Decentralized Crypto Exchanges in India
There are also various decentralized exchanges or DEXs operating in the region. DEX platforms may allow its investors to make P2P trades or participate in liquidity pools. At the same time, DEX utilizes smart contracts to automate the governance of DEX platforms as a way to bring more transparency to them.
A visible advantage associated with DEX platforms is that they allow investors to store their reserves in non-custodial wallets that grant them full control over their private keys and asset ownership. Furthermore, DEXs do not have hefty registration requirements or lengthy KYC checks. Plus, investors enjoy better transaction privacy on DEXs.
Bitcoin System Investment Plans (SIP) in India
A System Investment Plan (SIP) is a type of investment strategy fashioned after the Dollar Cost Averaging (DCA) method. SIP accounts allow investors to purchase a set amount of cryptocurrencies at regular intervals. SIPs are one of the fundamental aspects of traditional investment products such as stocks and mutual funds.
SIP is a long-term investment strategy that benefits investors who are seeking exposure to growth stocks or index-based funds. SIP service providers operating in India are usually regulated platforms that require KYC registration.
Peer-to-Peer (P2P) Trading Platforms in India
Another important trading platform operational in India is the peer-to-peer (P2P) trading platform. This type of trading forum allows investors to make direct trades on and off exchanges. On-exchange P2P trading platforms have KYC and registration requirements.
Meanwhile, the off-exchange P2P platforms can take place on decentralized exchanges and present in the form of independent custodial wallets.
Meanwhile, there are also OTC platforms where investors can trade cryptocurrencies in a P2P manner. OTC brokers work as an intermediary between trusted buyers and sellers.
Some OTC platforms may also allow investors to create digital trade contracts and escrow accounts in exchange for a fee to ensure safety for investors. Investors may make payments using bank wires, digital wallets, or direct wallet transfers.
Cryptocurrency trade in India is thriving and growing at a considerable rate. With the passage of time, cryptocurrency investment has become one of the most popular and accessible investment options for investors hailing from the region.