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Evo Tech Reviews

Crypto relief for India’s COVID-19 crisis pours in, even as it remains a legal grey area

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Abhishek SamuelMay 11, 2021 20:00:42 IST

Ethereum co-founder Vitalik Buterin messaged Polygon co-founder Sandeep Nailwal on 7 May: “Hey, I donated some more”. The some more here is three million dollars (approx. Rs 22.02 crore) in Elon Musk’s favourite meme currency, Dogecoin, towards Nailwal’s COVID-19 relief initiative for India, Crypto Relief. Buterin initially donated $600,000 in Ether to this initiative. The fund set up by Nailwal for COVID-19 relief in India has so far collected donations amounting to about six million dollars (approx. Rs 44.02 crore) in 10 different cryptocurrencies. The funny thing is, cryptocurrency hasn’t even been legalised in India yet.

As the country battles the second wave of the COVID-19 pandemic and scores of people gasp for critical oxygen supply, help has poured in from all corners, including from some surprising quarters. While the government of India mulls a ban on cryptocurrency trading, players from this space have collected cryptocurrency donations via Crypto Relief to help keep India’s stretched-thin healthcare system afloat.

Other major crypto donors to the cause include former Australian cricketer Brett Lee, who donated one Bitcoin (approx. Rs 45 lakh), as well as angel investor and entrepreneur Balaji Srinivasan, who donated $50,000 (approx. Rs 36.68 lakh) worth of Ether. But later, Srinivasan – a stalwart of the crypto space – pledged to double his donation to $100,000. Hubspot co-founder and CTO Dharmesh Shah then pledged to match Srinivasan’s donation as well.

The fund was initiated by the Polygon (previously Matic) co-founder, putting up a call to arms to his compadres on Twitter and setting up a website, cryptorelief.in, only a fortnight ago.

Speaking to Tech2, Nailwal explains that his mission with Crypto Relief was to ensure complete transparency and compliance with existing laws, with regards to bringing the donations into the country. This is the reason Crypto Relief didn’t simply transfer the funds to Indian crypto exchanges and disburse them directly.

“We had initially considered all the three top cryptocurrency exchanges in India – CoinDCX, WazirX and BitBNS – who had shown us support. However, we realised it was not compliant to go through them, and it would create risks for them as well. So, we considered other options and finalised one,” he says.

Subsequently, Nailwal set up a special entity in the UAE, IN COVID SUPPORT FZE LLC, wherein all the collected donations were held in crypto wallets. All wallet details – including the amounts collected under each cryptocurrency – are available to view publicly.

“From there, the entity can transfer the cryptocurrency to a US-based bank account and convert it into fiat (tangible) currency. We’ve tied up with FV Bank to carry out the fund transfer,” Nailwal explains.

Adding to this, compliance head for Crypto Relief, Deepak Vachher, explained they considered around 11 to 12 options to bring the donations into the country, before settling on the method they chose. Vachher is among India’s top CAs in the crypto space.

“While there are no guidelines from the government regarding foreign funds in cryptocurrency, there exist clear-cut laws in terms of fiat foreign currency under the FCRA, 2010. Hence, disbursing the donations from a bank account in US dollars to trusts and NGOs that are FCRA-approved to receive foreign fund donations seemed to be the most regulation-compliant way,” says Vachher.

Through this route, Crypto Relief has already disbursed $999,900 (approx. Rs 7.4 crore) from its wallet through United Way of Bengaluru to ACT Grants, a grant set up by India’s startup community to support the demand for medical oxygen in the country, with another $500,000 already converted and ready for transfer in the fund’s bank account.

Further, Nailwal says that his as well Crypto Relief’s Twitter inboxes have been inundated by individuals requesting oxygen and medical support across India. To help these individuals, Crypto Relief has tied up with Medikabazaar and Aknamed, both tech-enabled healthcare supply platforms.

All this is a lot of activity for Nailwal or Vachher to juggle on their own. Both have received support from a team of volunteers, to communicate with whom, they set up their very own Discord server. A group of these volunteers also found out an Indian Navy vessel was setting sail from Kuwait with 1,000 cylinders of oxygen donated by Kuwaiti authorities with room to spare. So, the team purchased and donated another 1,000 cylinders to the Indian Embassy in Kuwait to add to the INS Kochi payload.

Not only this, but other players from the space (including digital artists) have also made their contributions. Digital art being burned to non-fungible tokens (NFTs) by Cryptoart India Collective has brought together 44 such artists. The 44 artists have collaborated to create a collage of one art piece each. They’ve announced another collaboration with 17 artists as well, pledging 100 percent of the proceeds to Crypto Relief.

Is cryptocurrency legal?

Although there is much activity from the cryptoverse towards COVID-19 relief, the fact remains that cryptocurrency has not been legalised in India. More specifically, it remains unregulated. An industry insider who works with some top names in the space in India, explains: “The Reserve Bank of India (RBI) had in a circular from April 2018 directed all entities regulated by it to not trade or deal in virtual currencies or provide services to anyone dealing with them. Then, in March 2020, the Supreme Court quashed the RBI ban on virtual currencies including cryptocurrency.”

Cryptocurrency trading in India occupies a grey area until legislation covering it comes into effect. Image: Michael Wuensch from Pixabay.

Cryptocurrency trading in India occupies a grey area until legislation covering it comes into effect. Image: Michael Wuensch from Pixabay.

“However, since then, the RBI has not issued a circular withdrawing its earlier ban. The Banks and NBFCs that fall under RBI regulation will not make a move until the central bank says so. So, in essence, cryptocurrency trading in India occupies a grey area until legislation covering it comes into effect,” the insider tells Tech2.

The government is already working on the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, to reportedly ban all private digital currencies (cryptocurrencies) and promote regulatory framework to launch its own official Central Bank Digital Currency (CBDC) backed by the RBI. Industry rumours suggest the CBDC will be named Laxmi Coin. The Bill was to be tabled in Parliament’s Budget Session, but was deferred as the government continues to talk to stakeholders in the space.

Union Finance Minister Nirmala Sitharaman had in March this year said they are “not shutting off all options”. She said people will be given adequate windows to experiment with Blockchain, Bitcoin, and cryptocurrency.

So, until the government and RBI clarify their stands and table regulatory legislation, the colour of cryptocurrency’s future in India remains grey. That is a big patch of grey, considering industry estimates peg the value of Indian investments in cryptocurrency at around $1.5 billion (Rs. 10,000 crore).

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10:46 AM
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