Why an Indian Stablecoin Is the Need of An Hour?
There are a lot of people who believe cryptocurrencies are important and hold a very vital position in the future economics of money. Many people also have a desire to invest in these coins of the future but it’s the rapid price movement that keeps them away from investing. This has blocked cryptocurrencies from being used in the daily life of people and replacing the normal fiat currency. This is what led to the birth of Stablecoins which have now become an important tool to introduce people to the power of blockchain and cryptocurrencies while providing them with the stability of fiat.
To give a background, Stablecoins are often pegged to a stable asset like a fiat currency such as a USD in one to one ratio which dries up the unusual volatility which is often seen by a lot of cryptocurrencies. This means the investor of a stablecoin can redeem his stablecoin at any time for the underlying collateral.
Indian Crypto Industry- Rising back from the ashes
The growth of crypto industry in India was halted at a very early stage by the forced order of the Reserve Bank of India which ended the INR lifeline from the crypto industry in 2018. It took two years for things to open up again as a recent order by the top court of the country has provided some hope to the industry which is currently fallen behind compared to the other countries of the world.
Indian crypto industry, now, is left with very limited players and a few interested people. Hence they have very little access to advanced tools and the interest of the people is also low. This is the reason the exchanges in India have very low volumes and the prices of an unusual premium proving a big disadvantage for Indian investors, traders and businesses.
How Stablecoin can help in the Revival of Indian Crypto Industry?
- Better price for Crypto Assets: Recently Indian fiat currency , the INR, saw some weakening against the dollar. In the second week of March 2020, the price of Indian Rupee (INR) in the currency market traded at an all-time record low of Rs 75 and lower. While the Indian fiat (INR) was already under pressure, an interesting thing was seen in the Indian crypto-exchanges where USDT/INR in Indian Markets went above Rs 90 for one stablecoin.
Even while writing this article the USDT was still closer to Rs. 79 while the INR in the forex market was at 76.2360- clearly a disadvantageous premium for an Indian crypto enthusiast and businesses. The major reason cited for this difference in price is because the volume of trades in Indian exchanges is very low and doesn’t get the normal price compared to what it does in the international crypto exchanges leaving a premium 4% to 7 % on any given day and increasing on days where they days when INR is super weak in the foreign currency market.
An Indian stablecoin would be so useful to stabilize this price by removing this premium as people will have a domestic currency pegged stablecoin to hold thus removing out the premium generated in the Indian crypto exchanges.
- Easier to End Fear in the Minds of People: A lot of people want to trade cryptocurrencies but the instability of the crypto markets always keeps them away. There is always a fear in the mind of new investors that they might lose their money in the unpredictability of the cryptocurrencies.
A stablecoin is a perfect tool that can help them built trust in blockchain technology and also allow them to stay in cryptocurrency slowly killing their fear towards this new kind of digital money which not only technically superior to the fiat they hold but also is the future of money.
- Provide Indians Global Access: Currently, it is difficult for an Indian investor to directly buy coins in international exchanges which have higher volumes and better price discoveries. Anyone who wants to buy coins internationally has to buy cryptos using their fiat in Indian markets and then movie their coin holdings to the international exchanges thus creating a tedious process. Also, the volatility of in the crypto markets may sometime create a disadvantageous position while following this process
An INR pegged stablecoin can help in reducing this process significantly and also being a stablecoin can help in reducing the position risk which an investor may take while moving his holdings from one exchange to another.
- Fairly Easier to get government approval: Indian officials are not a great supporter of cryptocurrencies as they believe a lot of people would use cryptocurrencies as a tool to hide their black money. In this scenario getting the permission of the regulator will next to be impossible. But if a stablecoin is created with all compliances, audits and KYC/AML laws in place, there is a possibility that the regulators might agree upon it. As the Indian government had already considered the idea of Central Bank Digital Currencies(CBDCs) it would not be very difficult to explain the criticalities of the business. It is not going to be a cakewalk but yes comparatively easier to get permission.
With the current global uncertain scenario and investors running out of options to invest, stablecoins are seeing greater capital flows which also is an indicator that crypto markets may see greater participation from both types of users: institutional and retail. It seems to be the right time for Indian investors to get a stablecoin in place as compliant stable coins will make it more accessible for new users to enter this tokenized economy
Its time for India to get ready to get a Truefriend who can give them the power of cryptocurrencies with the stability of INR. Come embrace the future.