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Despite negative news flow in the global crypto space, Indian investors are still chasing better returns through the ‘earn’ features on their exchanges.
Popularly known as ‘yield farming’, the method sees investors depositing their crypto assets into a pool, which is then used by the exchanges to further enter risky ventures. Through these risky ventures, the investors earn anywhere between 6-12% worth of returns.
But what the investors might be missing is that unlike formal financial products where a regulatory infrastructure protects them, crypto exchanges in India are not governed by any authority, greatly increasing their risk, experts said.
The story is different in other geographies. Last week, the U.S. Securities and Exchange Commission charged crypto exchange Gemini and crypto lender Genesis with “unregistered offer and sale of securities to U.S. retail investors”, related to Gemini’s earn programme run in partnership with Genesis.
In the recent past, international crypto lenders, such as Celsius and Vauld, who offered similar products, have both gone bankrupt and are yet to return funds deposited by customers.
In India, though, crypto rules are yet to arrive and existing securities laws don’t apply because the asset class is yet to be officially classified by the government. Even though earn programmes are “akin to deposits, [crypto] is not a recognised currency”, R Gandhi, former deputy governor, Reserve Bank of India, told BQ Prime.
This leads them beyond the RBI’s purview and since the Securities and Exchange Board of India hasn’t recognised such assets as securities, they don’t regulate them either. Therefore, crypto activity in India is “falling in between stools”, Gandhi said.
The RBI and SEBI did not respond to requests seeking a comment on the story.
The lack of rules, though, hasn’t stopped users from jumping in to seek returns. For Indian crypto exchanges BitBns, Unocoin and CoinDCX, users of their ‘earn’ features stand at about 18%, 20% and 25% of their overall user base respectively, according to the exchanges.
“Would definitely agree that this will eventually come into SEBI’s purview,” Sharat Chandra, co-founder of India Blockchain Forum, said.
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Image and article originally from www.bqprime.com. Read the original article here.