The wording of the Lok Sabha bulletin released late on Tuesday has spooked both investors as well as venture capitalists.
The Bill seeks to prohibit all private cryptocurrencies in India but allows for “certain exceptions to promote the underlying technology and its uses”.
Over the last few days, leading cryptocurrency exchanges have rushed to organise calls and meetings to calm investors.
In the last two years, several investors including Silicon Valley-based venture fund Andreessen Horowitz, Sequoia, Facebook co-founder Eduardo Saverin’s B Capital and Coinbase Ventures have together invested more than $500 million in several crypto exchanges.
Insiders say all the top exchanges – Coinswitch Kuber, CoinDCX and WazirX – have lined up calls with investors, including strategic ones.
“The main concern that’s being raised is, whether anything is different this time around, and what is the strategy going ahead. We do not think the government will completely ban crypto assets and that’s what we told the investors during the calls,” said a promoter at one of the exchanges.
Both CoinDCX and Coinswitch Kuber are worth more than $1 billion, while Binance-owned Indian crypto exchange WazirX is valued at around $200 million.
“Investors do understand the regulatory landscape in India that continues to be the same for the past few years. The confusion that has emerged a couple of days ago may remain for about four weeks,” said Sathvik Vishwanath, co-founder and CEO of Unocoin, a cryptocurrency exchange that has raised four funding rounds so far from Draper Associates, XBTO Ventures and 2020 Ventures.
“The questions our investors ask nowadays is, what do you think is going to happen or how do you think we should be prepared with and pivot with whatever is required,” said Vishwanath.
This has come at a time when many exchanges have reached out to their users to explain the situation after a nudge from investors.
According to people aware of the development, ongoing investments have been put on hold in at least two cases.
Crypto industry executives, however, said the panic was premature.
“The concerns are mostly about the classification of cryptos, how private and public cryptos will be classified, taxation, etc. We recommend that all our investors keep calm and stay updated about the details of the upcoming Bill,” said Raj Karkara, chief operating officer of ZebPay, a cryptocurrency exchange.
Holders of cryptocurrency went into panic-selling mode on Tuesday, flooding the exchanges at midnight after being rattled as the wording implied a ban on all private virtual coins. Prices of the most-valued cryptocurrencies such as Bitcoin and Ethereum fell as much as 15%.
Crypto exchanges, which urged investors to not rush into selling, are hopeful that while PE and VC funds have held back India plans, they would be back soon once the government gives clarity.
“So as far as fresh investments are concerned, it will be back to normal once there is some clarity during this time. The only time when raising fresh investments will be impacted will be this month,” said Vishwanath.
Many are still hopeful fresh investments may not get impacted.
“ The investment will not get delayed or impacted due to this. We believe the government will come out with regulations for the crypto assets in India – that will only lay the foundation for crypto trading in India strong. These regulations will further provide credibility to the industry, ensuring that our customers are protected, financial stability is reinforced, and the country is able to take full advantage of the revolutionary crypto technology,” said Vikas Ahuja, CEO of CrossTower India.
