The prospect of a fresh ban on cryptocurrencies in India has sent an army of crypto investors scrambling to think of ways to protect or liquidate their holdings. This, as the government appears to be in final stages of bringing in a new legislation governing Bitcoin and other such tokens in India.
On Thursday, BloombergQuint reported that India will go ahead with a complete ban on investment in cryptocurrencies via domestic and foreign exchanges, after giving investors a transition period of three-to-six months. The full contents of proposed cryptocurrency bill are not in public domain.
While there is no official data available, the three largest crypto-exchanges—WazirX, Unocoin and CoinDCX—claim that there are anywhere between 60 lakh to one crore cryptocurrency holders in the country with holdings of over Rs 10,000 crore.
These crypto investors are looking at options ranging from ‘self-custody wallets’ to transferring and selling their tokens. To be sure, provisions included in the upcoming legislation, once detailed, will eventually guide these choices.
Option 1: Move Towards ‘Self-Custody’ Wallets
One option being explored by crypto investors is to move their holdings into ‘self-custody’ wallets.
This means that investors could either store their digital wealth in a hard wallet, which is a small digital device like a USB drive, microSD card or a smart card. This device stores the investor’s private bitcoin key/s and can be locked away at a safe place or sent to a friend or relative. Some of the popular hardware wallets for storing bitcoins include Ledger, Trezor, Exodus and BitLox.
Youtuber Aditya Singh, who runs a channel called ‘Crypto India’, told BloombergQuint that many cryptocurrency investors have reached out with queries on how they could stash their digital tokens away from cryptocurrency exchange wallets.
“There are multiple ways to do that (store cryptocurrency) but the easiest is to take the custody of your wallet,” said Singh. “Investors who are worried that it might be end of the road for cryptocurrency in India are shifting their virtual currencies from exchange custody to self-custody online or hardware wallets,” he said.
However, there is a caveat. If a cryptocurrency is transferred via a wallet that exists on an Indian exchange, authorities can track it down if they want.
“Even as the blockchain system is decentralised, the know-your-customer norms followed by the country’s exchanges require users to reveal their identity and that could be a way for authorities to trace it back to the person who holds cryptocurrency in the exchange’s wallet,” said Singh.
Option 2: Transfer To Friends/Family Overseas
The other option that cryptocurrency investors can also explore is transferring their crypto-tokens from their wallet to their family or friends living abroad, ahead…