Hyderabad: The gold rush of cryptocurrency may have allured many Indians to its fold over the last year but many new entrants are still finding it an uphill task to wade through the nitty gritty of investing in digital currency.
While there are many platforms to invest in crypto, one needs to be extra cautious because in the case of cryptocurrencies, there is no central regulatory body that will come to your rescue as in the case of stock markets, where you can reach out to the Securities Exchange Board of India (SEBI) for redressal of grievances.
Nischal Shetty, CEO of crypto exchange WazirX and member of Blockchain and Crypto Assets Council (BACC), set up under the aegis of the Internet and Mobile Association of India (IAMAI), said there are over 1.5 crore investors holding crypto assets worth over Rs 1,500 crore in India. Shetty explained that cryptos are not a get-rich-quick scheme but a high-risk form of investment, which is why people should only invest based on their risk appetite.
Darshan Bathija, CEO of crypto exchange Vauld, pointed out that anyone can start a crypto exchange since cryptocurrencies are unregulated instruments.
“It is important to check who backs these exchanges – who the investors in the platform are as well as the backgrounds of the core team and founders of crypto exchanges,” he said.
Apart from that, he said it may be beneficial to see if the platform has the appropriate legal licenses to serve your geographical location.
Hygiene checks like app store reviews and social media presence could be helpful. The best test would be to contact the customer support of the platform to alleviate any concerns, he added.
While it is difficult to pinpoint the exact number of crypto exchanges extending their services in India, it is a common practice for popular ones to resort to self-regulation.
Shetty of WazirX, which has nearly 6.5 million investors on its platform, said that they perform stringent KYC verification of every user with their PAN card, photo and address proof.
“We also do a secondary KYC verification through the linked bank accounts of users to ensure that we receive deposits only from whitelisted bank accounts before allowing a customer to transact on WazirX. Lastly, we allow only KYC-verified and whitelisted accounts to withdraw funds from our exchange,” he said.
Similarly, Avinash Shekhar, Co-CEO, ZebPay, that has over 4 million users, said the exchange currently has a KYC procedure in place which requires all users to verify themselves using their address proof, ID proof, and complete bank account verification. Users can transfer funds in INR to and from the verified account only.
Shetty said India can take a cue from developed countries like the US, UK, Switzerland, Japan and New Zealand, among others, who are already trying to regulate crypto assets in a way that they foster innovation and fight crime at the same time.
The Indian government is still mulling its stance towards cryptocurrency with Union finance minister Nirmala Sitharaman, earlier this year, indicating that the government would take a `calibrated approach’ to cryptocurrency.
GFX: DECODING THE CRYPTO CODE
DO YOUR OWN THOROUGH RESEARCH BEFORE TAKING THE PLUNGE
QUOTE BOX: “Every investor needs to do due diligence before investing in crypto by reading the whitepaper and learning from experts. They must trade through trusted crypto exchanges in India who comply with KYC and AML (Anti Money Laundering) policies and use 2FA (Two-factor authentication). They must not fall for scams like ‘deposit x tokens to get double of it’.” — Nischal Shetty, member, Blockchain and Crypto Assets Council (BACC).
MIND YOUR CRYPTO
— For starters, cryptocurrency exchanges can be broadly classified into centralised exchanges (CEXs) and decentralised exchanges (DEXs).
— In CEX, crypto fund is in the custody of the exchange and your buy or sell order is executed through your orderbook. Binance, Coinbase, KuCoin, WazirX and CoinDCX are some of the CEXs.
— In DEXs, crypto fund is in the custody of an individual. Uniswap, SushiSwap, Kyber, dYdX, IDEX and Balancer, among others are some of the DEXs
— For self-regulation policies, a CEX in India can ask for KYC documents like Aadhar card and PAN card for user registrations
— It is important to learn about the security & compliance and insurance measures taken by an exchange
— Start with small investments
— When you check the crypto assets that are listed, understand the technology backing the crypto token, instead of giving in to hype and FOMO
Source- WazirX, ZebPay