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⚡Crypto Comeback in India!?️

Croxroad

06 Sep 2024 — 5 min read

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The menu for today:

🇮🇳 Binance and Kucoin Ban Lifted

India’s Financial Intelligence Unit (FIU-India) is currently reviewing four offshore cryptocurrency exchanges for potential approval to resume operations in the country. This follows the recent lifting of bans on major exchanges Binance and Kucoin, both of which have now been authorised to operate as Virtual Asset Service Providers (VASPs). The focus of the FIU’s review is ensuring that these exchanges comply with anti-money laundering (AML) regulations, including transaction transparency and the proper reporting of suspicious activities. According to sources familiar with the review process, at least two of the four exchanges are expected to be granted approval by the end of the fiscal year 2025, pending thorough regulatory scrutiny.

The approval process for these exchanges is centred on their ability to meet strict compliance requirements, particularly in terms of transaction visibility and adherence to Suspicious Transaction Reporting (STR) protocols. FIU-India officials have emphasised the importance of due diligence before any exchange is allowed to operate within the country. They have made it clear that only exchanges that can demonstrate full compliance with AML regulations will be given permission to resume operations. Binance and Kucoin, the first exchanges to be permitted back into the Indian market, have already addressed their non-compliance issues, with Kucoin paying a fine of Rs 35.5 lakh (~$43,000) and Binance being fined $2.25 million (₹18.8 crore) for previous violations.

The Indian government’s tough stance on offshore exchanges is part of its broader effort to regulate the cryptocurrency sector. Last year, access to nine offshore exchanges was barred, with officials citing non-compliance as the primary reason. While offshore exchanges are not required to set up separate entities within India, they must appoint a compliance officer registered with FIU-India to oversee operations. The actions taken by FIU-India underline the country’s commitment to maintaining financial transparency and security in the growing crypto market, with a focus on ensuring that any platform allowed to operate meets the highest standards of regulatory compliance.

👮 Fed on the Fence

The U.S. government is set to release its Nonfarm Payrolls Report for August tomorrow, marking one of the final key economic data points for the Federal Reserve before its upcoming rate-setting meeting. Economists forecast the addition of 160,000 jobs, up from July's modest 114,000, with the unemployment rate expected to drop slightly to 4.2%. A stronger-than-expected report is likely to lead the Fed to cut its benchmark interest rate by 25 basis points, while a softer number could push traders to price in a larger 50 basis point cut. Recent economic indicators, including the ISM Manufacturing PMI and the ADP jobs report, have been weak, intensifying speculation about more aggressive rate cuts. CME FedWatch now shows a 44% chance of a 50 basis point cut, up from 34% just a week ago.

For Bitcoin, this upcoming easing cycle presents an unusual scenario. Historically, periods of monetary easing and rate cuts were considered highly bullish for Bitcoin, as seen during the 2008 financial crisis and the Fed's aggressive Covid-era policies in 2020. During these times, Bitcoin surged, transforming from a niche asset to a $1 trillion asset class in less than a year. However, the current environment has shown little of the same enthusiasm. Despite signals that rate cuts are on the horizon, Bitcoin’s price has continued to slide, currently sitting at $56,300, down 5% over the last month and more than 23% below its all-time high of $73,500, reached six months ago.

Quinn Thompson, CIO of Lekker Capital, recently commented on the broader market's reaction to weakening economic data, stating that conviction in a 50 basis point Fed cut is rising. Still, investors remain cautious. Thompson’s sentiment could easily apply to Bitcoin as well. Despite previous market conditions where rate cuts fueled optimism and upward momentum, investors today seem too burned by recent losses to jump back in, making it unclear whether Bitcoin will benefit from the Fed's easing cycle this time around.

🎓 Understanding Bitcoin – What is Bitcoin in-depth?

Bitcoin is a form of virtual currency and a revolutionary technology. It allows you to send payments securely using a unique encrypted signature, which can be decoded by the recipient. Unlike traditional money, Bitcoin transactions are facilitated through a decentralised peer-to-peer network, ensuring transparency and security without relying on central authorities. This system, powered by blockchain technology, was pioneered by Satoshi Nakamoto and ensures that Bitcoin remains immutable, meaning that transactions cannot be altered once verified, making it a trusted method for buying and selling goods or services globally.

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