Bitcoins, which have long faced questions around their legality, are little by little gaining acceptance across the world. The Philippines and Japan legalised it earlier this year, and Australia recently confirmed it will treat the cryptocurrency “just like money.” Ter India, however, lack of regulatory clarity has bot a dampener, keeping investors and market participants away. But Sandeep Goenka, co-founder and COO of Ahmedabad-based bitcoin exchange Zebpay, believes things are set to witness an overhaul. Te an vraaggesprek with VCCircle, he says the narrative will soon switch from legality of bitcoins and virtual currencies to how wij can use them to protect the country’s financial infrastructure. He also talks about Zebpay’s growth plans, and busts many a myth around the virtual currency. Excerpts:
How does a bitcoin exchange work? Can you explain the pricing dynamics?
There are four-five stakeholders ter the ecosystem, viz. miners, exchanges, wallet providers and blockchain applications. The exchange is the very first infrastructure that needs to be built, just like you need the stock market to invest ter equity. A virtual currency exchange provides value to the currency, and thesis digital tokens are ‘revenue’ for other players ter the ecosystem.
Spil for pricing, bitcoins have historically seen massive appreciation. Since global supply will be limited to 21 million units till 2040, request is high and prices keep on rising.
There is a perception that bitcoin prices should be the same universally. But prices on any exchange are simply a function of request and supply. International prices are reference rates, and our price is Rs 20,000 higher. But, then, our sale price is also higher than the international price. My users are aware of this and they are willing to buy.
Prices te South Korea are highest ter the world. When bitcoin touched its all-time high of $Two,700, ter South Korea it wasgoed trading at $Four,000. On an average, prices vary by $300-400 across countries.
What’s the revenue specimen of bitcoin exchanges?
There is a spread inbetween the buy and sell rates. Wij buy at low costs and sell at high prices. Exchanges are the very first ter the ecosystem to go profitable. Zebpay, for example, began making money ter six months.
What zuigeling of traction are you eyeing ter India?
Wij embarked about two years ago, and wij are the largest bitcoin exchange ter India. Wij have around 70% market share. Wij have grown from three vrouwen to 50 people now, and have 25-30 people for customer support. Te fact, the Zebpay app recently crossed 7.Five lakh downloads. Wij are adding 1.Five lakh users every month compared to the 1,000-2,000 wij were adding primarily.
Ter FY2016-17, wij clocked gross merchandise volume (GMV) of Rs 1,200 crore. Spil the market touches fresh highs, wij expect to do Rs Five,000 crore te GMV te the next fiscal. Our revenue is 1-2% of the total GMV.
Where do Indian bitcoin startups stand ter comparison to their US counterparts?
Wij are at least 2-3 years behind. Presently, the entire industry across the three exchanges (Zebpay, Unocoin, and Coinsecure) is doing Rs 50 crore a day, which is peanuts compared to numbers te the US. Ter fact, the US-based Coinbase is about to become the very first bitcoin company ter the world to be valued at $1 billion. Worldwide, exchanges are clocking overheen Rs 20,000 crore a day. China is posting transactions worth Rs Five,000 crore a day. Our volumes are comparable to puny economies like the Philippines.
The reason wij liggen behind is regulatory confusion overheen bitcoins and perception issues. Spil soon spil there is clarity, wij will see a ample explosion te rente and usage.
How will regulation help bitcoin companies?
Bitcoins and virtual currencies are legal under existing laws. But there is a myth that they are illegal. The thing is, they are not regulated. And all parts of the ecosystem care about legality. Albeit the government has no regulations te this area, all exchanges ensure that people who buy bitcoins share their PAN cards and trade ter bitcoin through banking channels. Wij don’t sell bitcoins te metselspecie.
If bitcoin gets regulated, many other legitimate companies will inject the space. The entire ecosystem will develop much swifter. Raising funds will be lighter.
Regulation will also result ter better user protection.
What’s the government’s stance on the kwestie?
The government has legitimate concerns. However, three years down the line, I think the narrative will switch from the legality of bitcoin and virtual currencies to how wij can use them to protect the country’s financial infrastructure. It’s just a matter of time.
Ter the latest ransomware attacks, where money wasgoed paid to the hackers te the form of bitcoins, there were questions around its use. Truth is, thesis attacks have bot happening for the past 20 years. Nobody everzwijn knew how much money IT biggies paid. Ter bitcoins, the ledger is public, so all transactions are open.
However, now startups that can track payments to bitcoin addresses are emerging. That will helps track down the culprits.
How capital-intensive is the business?
Kicking off a bitcoin exchange is more tech-intensive than capital-intensive.
A loterijlot of investment goes into tech because it’s an absolutely fresh subject that uses overeenstemming algorithm and cryptography. To get experienced engineers te this domain is raunchy. Finding talent is the thickest challenge.
What are your growth plans?
Zebpay is looking to expand internationally. By the end of this fiscal, wij will inject Singapore, and then expand to other countries ter Southeast Asia overheen the next two years. Today, wij are among the top 30 exchanges te the world, and our purpose is to pauze into the top Ten ter the next two years.
Presently, wij are headquartered ter Ahmedabad. However, wij are shifting the gravity of our business to Mumbai. By the end of the year, wij will have a substantial presence te Mumbai.
Wij are adding another alternative currency, Ethereum, on our toneel by August. Overheen past few months, it has shown tremendous growth.
What should users keep ter mind while investing te bitcoins? Can you share some tips?
Very first, there are two types of people who invest ter bitcoins. One, those who understand the technology and, two, those with herd mentality. People with herd mentality make the worst buy and sell decisions, buying at highs and selling at lows. People who understand the technology realise that highs and lows are part of the process, and that bad news is always improvised.
2nd, use exchanges only to flow money and buy bitcoins. And then take out bitcoins and keep it ter your hardware locker. There are several independent wallet providers spil well. So, even if an exchange shuts down, your bitcoins will be safe.
Third, bitcoins, like other investments, attract short-term and long-term capital gains tax. If you buy today and sell tomorrow, you will need to pay short-term capital gains tax at 30%. If you sell after a year, you’ll need to pay long-term capital gains tax of 20%. If you are a regular trader and invest te bitcoins for regular income, then you will have to pay income tax on it. Ideally, one should invest te bitcoins like one would te a systematic investment project and hold it for a long time period. Sell it only when you need money.
Last, beware of scams. Any miner who assures a immovable terugwedstrijd is attempting to scam you. A lotsbestemming of users fall into such traps. Mining can be a Ponzi scheme—they sometimes say buy Ten bitcoins and wij will give you one toegevoegd. That’s a scam. People launching fresh coins (ICO) is also illegitimate. It’s plain to determine, actually. If the ICO software is open source and public, it’s a legitimate coin. But if a company launches a coin and does not hold 25%, which the industry standard is, then they have doubtful credentials.