- India’s finance minister said the government encourages a window of experiment for crypto.
- Indian crypto industry representatives told Decrypt it could mean that a total ban is off the table.
After much speculation about whether India will introduce a blanket ban on crypto, the government has finally dropped a major hint that it will not do so. The Indian crypto industry representatives told Decrypt that their constructive engagement with the government has paid off.
Nirmala Sitharaman, India’s Finance Minister, said yesterday on India’s business channel, CNBC-TV18, that the government’s position on crypto will be “calibrated” and it wants to make sure there’s “a window available for all types of experiments in the crypto world.”
“A lot of negotiations and discussions are happening around cryptocurrency with the Reserve Bank of India,” she said. “[India’s Central Bank] will be taking a call on what kind of unofficial cryptocurrency will have to be planned and how it has to be regulated.”
“So, we are not closing our minds, we are certainly looking at ways in which experimentations can happen in the digital world, cryptocurrency and so on.”
An exception for blockchain tech
In January, the Indian Parliament tabled the “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.”
The bill didn’t say much, except that it seeks to ban all “private cryptocurrencies”, save for certain unnamed exceptions (“to promote the underlying technology of cryptocurrency and its uses”), and introduce a framework for a central bank digital currency (CBDC).
That fuelled much anxiety in the Indian crypto industry. The exceptions in the draft bill were only granted to blockchain technology while remaining hawkish on cryptocurrencies.
As Decryptreported last month, following the announcement of the draft bill, several leading industry leaders coordinated efforts to fight off a total ban and push instead for a regulatory approach. Sitharaman’s statement yesterday was pretty much what the industry had hoped for, they told Decrypt.
Crypto ban no more?
Nischal Shetty, CEO of crypto exchange WazirX, told Decrypt that the Indian crypto industry sees this as the clearest sign yet that the government will not go ahead with a blanket ban on cryptocurrencies as previously feared.
I think @nsitharaman just won the entire Crypto sector in India with this clarity she’s given
India is going to take a calibrated view on Crypto
People of India, get ready to innovate and win.
— Nischal (WazirX) ⚡️ (@NischalShetty) March 5, 2021
“It’s amazing news for the Indian crypto industry,” he told Decrypt. “Our finance minister has now made it clear that India will not be banning crypto.”
For Shetty and others in the crypto industry campaigning against a ban, the next step is now to get the government to involve the crypto industry in policy-making. “This will help formulate the right crypto regulations in India,” he said.
Why has the government cooled its tone?
Sidharth Sogani, CEO of the Indian crypto intelligence firm CREBACO, told Decrypt that it’s the industry’s persistent dialogue with the government that has prevented a blanket ban.
Sogani, who also heads the industry pressure group, the Association for Blockchain, Crypto, and Digital Asset Entrepreneurs (ABCE), knew there wasn’t going to be an all-out restriction as the government asked “very inquisitive questions”, signaling that careful consideration is being paid with a regulatory framework in mind.
As mainstream institutions flock to the crypto space, the Indian government has seen crypto as an unmissable global trend, according to Sohail Merchant, CEO of the Indian crypto exchange PocketBits.
PocketBits is one of the members of the Blockchain and Cryptocurrency Committee (BACC), part of the wider tech industry association Internet and Mobile Association of India (IAMAI). BACC has been campaigning for a regulatory framework instead of an outright ban.
“The Indian government realizes that crypto is being adopted globally by corporations like PayPal, Tesla and top-tier banks,” Merchant told Decrypt. He reckons the best-case scenario is that the draft bill is referred to a standing committee to deliberate and modify it in a way that creates a regulatory framework that accommodates what he calls “India’s lead in the fintech space.”
“The world looks up to us for innovation.”
Crypto is a $1.5T market. It is poised to grow 10X to $15T in ten years.
If India does not participate then India loses a large market to other countries.
Crypto can help India realise its $5T economy goal.
Let’s compete and grow our economy 🚀#IndiaWantsCrypto
— Nischal (WazirX) ⚡️ (@NischalShetty) March 5, 2021
But for others in the crypto industry, it is not so much the global influence but rather the logical conclusion of an inward-looking policy platform. Sumit Gupta, CEO and co-founder of CoinDCX, told Decrypt that the “finance minister’s statement is a sign of the government’s resolve to digitize India and make us Atmanirbhar,” referring to Prime Minister Narendra Modi’s doctrine of a “self-sufficient India.”
We as an industry are engaging with relevant stakeholders on the proposed crypto bill. Leading crypto companies, VCs, and experts have joined hands to build public awareness among policymakers and public about crypto through #IndiaWantsBitcoin campaign https://t.co/3Ly4kcnURi https://t.co/eFDXd4N6Ja
— Sumit Gupta (CoinDCX) (@smtgpt) March 5, 2021
Either part of a global trend or an insular move, the latest announcement is set to calm India crypto’s regulatory FUD.
This ransomware gang moved $6.8 million in Bitcoin amid regulatory overhaul
Ransomware groups, Darkside and BlackMatter recently moved multi-million dollars worth of Bitcoin upon getting the news of REvil’s servers getting hacked by a global coalition of law enforcement agencies. According to the authorities, 107 BTC, which amounts to $6.8 million were moved earlier today by splitting the amount into several different wallets.
Furthermore, officials revealed that the gangs were already aware of regulators’ oversight and therefore had prepared the mentioned balance to be laundered or cashed out. According to The Record, officials noted that the breakdown of funds into smaller portions is usually used for money laundering operations as the regulators directly transfer the entire amount of confiscated funds instead of splitting them up.
“Basically, since 2AM UTC whoever controlled the wallet started to break the BTC into small chunks… At the time of this writing, the attackers split the funds into 7 wallets of 7-8 BTC and the rest (38BTC) is stored in the following wallet: bc1q9jy4pq5su9slh56gryydwkk0qjnqxvfwzm7xl6”, Omri Segev Moyal, CEO and co-founder of security firm Profero shared this data with The Record.
It is obvious that the Darkside and BlackMatter were next on the regulatory hitlist as Darkside was the ransomware strain developed by REvil associates that were used earlier this year in the infamous Colonial Pipeline incident of May. This attack indirectly led to fuel supply outages across the US East Coast.
REvil ransomware group’s website went offline
Yesterday, the Reuters’ report about REvil’s servers being hijacked by the regulators went viral and threw other ransomware groups in a fit of panic. A multi-nation operation against cybercrime group, REvil was implemented and took down the group’s “Happy Blog” website, which was formerly used to leak victim data and extort companies.
“The FBI, in conjunction with Cyber Command, the Secret Service and like-minded countries, have truly engaged in significant disruptive actions against these groups,” said Tom Kellermann, an adviser to the U.S. Secret Service on cybercrime investigations and VMWare head of cybersecurity strategy. “REvil was top of the list.”, he added.
First Bitcoin ETF in Immediate Danger of Hitting Cap on Contracts Held
The first bitcoin (BTC) futures-backed exchange-traded fund (ETF), ProShares’ BITO, is reportedly already in danger of breaching a limit on the number of futures contracts it is allowed to hold under current Chicago Mercantile Exchange (CME) rules.
BITO already owns nearly 1,900 bitcoin futures contracts expiring in October, according to Bloomberg data. The number is close to CME’s current rule that a single entity cannot own more than 2,000 front-month futures contracts, Bloomberg reported on Thursday, when BITO had only been live for two full days.
To get around the limit, the ETF has reportedly started buying futures contracts expiring in November in addition to the October contracts it holds, with 1,400 November contracts amassed so far. At the current pace, however, the fund could also soon reach CME’s cap on holdings for next-month contracts of 5,000 contracts, per the report.
And while the CME has already said it will increase the limits to 4,000 front-month contracts starting in November, this is also likely to be reached soon by BITO, which already has more than USD 1bn under management.
A major issue faced by ProShares’ ETF is that futures contracts tend to trade at a higher premium over spot prices the further away their expiry date is – a phenomenon known as contango in the futures market.
As such, choosing to get around the maximum limits by buying longer-dated contracts will mean the ETF has to get its bitcoin exposure at prices that are increasingly higher than spot. This could result in high costs when contracts are rolled over at expiry that will eventually be paid by the ETFs investors in the form of lower returns.
According to Bloomberg’s own ETF expert, Eric Balchunas, some of the pressure on the first ETF to be launched could be alleviated by competing ETFs coming to the market over the next few days and weeks. However, the first-mover advantage that BITO has gotten will still be difficult to challenge, he said.
“The unprecedented early volume in BITO makes it like a snowball rolling downhill, as liquidity and assets begets more liquidity and assets,” Balchunas said, adding that it will be “nearly impossible” for other ETFs to steal significant volume from BITO in the short or medium-term.
Commenting on the possibility of the ETF running into the ceiling, some speculated that the extreme popularity of the futures ETF could eventually pressure the US Securities and Exchange Commission (SEC) to allow a “physically” backed spot bitcoin to launch.
That scenario was suggested by Zhu Su, CEO of crypto hedge fund Three Arrows Capital, saying that it could lead to the ETF rising to a “hilarious premium,” leading the SEC to “approve a spot ETF because of public outrage.”
In a tweet, he also shared a comment from Max Boonen, Founder of electronic market maker B2C2, saying that it is “doubtful” that clearing houses will be comfortable with a single entity holding more than 4,000 front-month contracts.
“What happens when BITO surpasses 4k [contracts] as it surely will?”, Boonen asked.
So what if BITO halts creations bc hits CME OI limit, BITO spikes to hilarious prem, SEC rushes to approve spot ETF bc of public outrage, btc $1m, wyd https://t.co/1c5mRlg46j— Zhu Su 🔺 (@zhusu) October 21, 2021
A similar idea was also suggested by Eric Balchunas, saying in the Bloomberg report that BITO hitting the limits on how many futures contracts it is allowed to hold could pressure the SEC to allow a spot-based bitcoin ETF.
“That certainly would do the trick in slowing down BITO and providing a release valve for futures demand,” the senior ETF analyst said.
Meanwhile, the second bitcoin ETF to be approved by the SEC, the Valkyrie Bitcoin Strategy ETF with the ticker BTF, is scheduled to go live on the market today, October 22. BTF will also be backed by bitcoin futures contracts traded on the CME rather than by “physical” bitcoins.
BTF should go live on the Nasdaq exchange when the market opens at 09:30 ET (13:30 UTC).
Following the launch of Valkyrie’s fund today, a third bitcoin futures ETF, the VanEck Bitcoin Strategy ETF (XBTF), is set to go live on Monday on the Cboe BZX Exchange, according to a recent SEC filing.
Second US Bitcoin Futures ETF Launching Today – Here Are the Details
A new Bitcoin (BTC) futures exchange-traded fund (ETFs) rolls out today.
Valkyrie Investments, an alternative asset management firm, is launching the country’s second Bitcoin futures ETF, according to CEO Leah Wald.
The new product is called the Valkyrie Bitcoin Strategy ETF and will trade on the Nasdaq under the ticker symbol BTF.
The launch comes on the heels of ProShares’ Bitcoin futures exchange-traded fund, which exploded onto the market on Tuesday with the second-biggest ETF launch of all time.
Like ProShares’ Bitcoin Strategy ETF (BITO), the Valkyrie ETF doesn’t invest directly in BTC but provides price exposure to Bitcoin futures contracts.
Per the ETF’s prospectus,
“Under normal circumstances, the fund will seek to purchase a number of Bitcoin futures contracts so that the total notional value… of the Bitcoin underlying the futures contracts held by the fund is as close to 100% of the net assets of the fund as possible.”
Bitcoin is trading at $62,793, up nearly 10% on the week but down from its Wednesday all-time high of $67,276, according to CoinGecko.