Will they ban it? Will they not? The uncertainty over India’s approach to cryptocurrencies persists.
The nervousness worsened after the government listed a bill for introduction in the upcoming session of parliament. The description of the bill said it was intended to ban private cryptocurrencies. A report from Bloomberg suggested the ban may not be complete.
Panicked investors first sold their tokens in the local market where prices fell sharply, only to rebound later.
As crypto investors await clarity on which way the government will go, they may be wondering, “What if…”
Here are the options available to anyone who may need to or want to secure their investment in these tokens.
Sell and exit may sound like the obvious option. But in the case of cryptocurrencies, it is not always that simple.
Prices in the local market may have fallen due to an event risk, such as the one we saw this week, leaving you to earn less than your global peers. Also, trading volumes vary across exchanges and finding buyers amid a sell-off may be difficult.
Still, all exchanges will allow you to sell your cryptocurrencies and exit via a conversion to fiat currency.
For now though, exchanges are advising caution and asking investors not to panic sell.
“I urge all crypto asset investors in the country to remain calm, do their own research before arriving at a rushed conclusion. Investors should wait for a government statement on this matter and not rely on secondary sources of information,” said Ashish Singhal, founder and chief executive of CoinSwitch Kuber in a statement.
Instead of trying to exit amid a sell-off, investors could move their tokens from one exchange to another in a different jurisdiction. But not all exchanges offer this option.
WazirX allows users to transfer or withdraw their crypto holdings from their own wallet to a Binance wallet, without any fee or charge. Binance acquired the Indian crypto exchange at the end of 2019, providing it with a foothold in the world’s second most populated country.
“Users can transfer their holdings from one exchange to another. There’s a small fee charged on withdrawals,” a WazirX spokesperson told BloombergQuint. Transfers to Binance have been briefly kept free of cost.
Other major Indian crypto exchanges like CoinDCX, ZebPay, Giottus, Unocoin and Bitbns also provide a withdrawal facility, according to information available on their websites. The withdrawal fee is a flat fee charged in decimals of the same token you are trying to exit. It varies for each cryptocurrency but isn’t dependent on how many coins are being transferred.
To transfer holdings, a user simply has to provide the address of their new exchange account or wallet. The transfers are seamless and quick.
CoinSwitch Kuber is an outlier and does not permit the transfer of cryptocurrencies.
“We’re aiming to be an investment platform and want to encourage long-term holding practices,” said Singhal of CoinSwitch Kuber. “At the same time, withdrawals are an issue for regulators because it’s hard to track or determine their destination or future path. Even the exchange can’t trace it, opening a brand new Pandora’s box due to concerns of illicit transactions.”
A third option is to store your tokens in a wallet as you decide what to do with them.
App or web-based cryptocurrency wallets like MetaMask, Freewallet, Electrum, and more are widely used. These are virtual and also called hot wallets, because they can store the private keys of the coin or token, on the internet.
There are also cold wallets. Unlike cloud-based wallets, cold wallets store information locally and work independently of the internet. A near field communication chip, an offline computer, or even a piece of paper can be referred to as a cold wallet.
Hardware wallets, on the other hand, are plug-and-use devices that are similar to a pen drive. “These are considered safer because they are physical and portable. Think of it as a conventional vault, but much smaller. They must be handled with care since any damage to the storage drive can render all tokens unrecoverable if the password or pneumatic string doesn’t have a backup,” said Sidharth Sogani, founder and chief executive officer of Crebaco Global, a research company focused on blockchain.
A few popular options for hardware wallets for storing digital assets are Trezor, Ledger, and SafePal, Sogani said.