Defi tokens gain popularity in India as investors hunt for the next bitcoin

Creating a new block.
Creating a new block.
Image: REUTERS/Darrin Zammit Lupi
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Now that restrictions on cryptocurrency have eased, Indians are going all out to bet on it.

Buoyed by the stellar returns made over the last six months, Indian crypto investors are flocking to decentralised finance (defi) currencies. Defi tokens are transparent blockchain-based financial networks on which lending, borrowing, and other transactions can take place without the intervention of a third party like a bank.

While the concept has been around for more than five years, there is a sudden surge of interest in these coins as they promise to replace financial institutions with smart contracts, which are self-executing with all conditions written in code. “Smart contracts seem uniquely poised among new technologies to facilitate the transformation of assets—one of the most central roles of existing financial market institutions,” said Ariel Zetlin-Jones, associate professor of economics at Carnegie Mellon University’s Tepper School of Business.

So as Indian investors hunt for the next bitcoin, defi token is being viewed as a lucrative option, according to Ashish Singhal, CEO of CoinSwitch, a Bengaluru-based global aggregator exchange that recently launched a platform tailored for Indian retail investors.

On Aug. 19, when CoinSwitch listed six defi coins on its exchange, Indians ploughed around $1 million (Rs7.39 crore) on a single day. And over the next 30 days, defi coins worth $10 million were traded.

Similarly, defi tokens have been gaining ground on WazirX, one of the popular crypto exchanges in India. The exchange has listed 16 defi coins, of which 12 hit the bourse over the last four months.

“Every week we are adding a defi token. Around $2 million to $3 million defi tokens are traded daily, accounting for 25% of total traded volumes,” said founder and CEO Nischal Shetty of WazirX.

This trend has caught on from the US, where new defi tokens are gaining strong tractions within hours of listing on exchanges. Globally, there are more than 200 tokens available today with many receiving heavy traction.

Around $8.91 billion has been invested in defi token globally as of now, according to Defi Pulse Index, compared to $4 billion at the start of August.

Total value locked in defi tokens.
Total value locked in defi tokens.
Image: Defi Pulse Index

While the popularity of defi tokens surges, they face a familiar foe back in India.

Regulatory hurdle

The biggest thorn for cryptocurrencies in India has been the regulators.

The sword of a blanket ban continues to hang over cryptocurrencies. In fact, the Indian Union cabinet will be soon discussing a bill to ban virtual currencies, according to a recent news report.

There is another flip side: the fear of history repeating itself.

With the global economic crisis deepening, investors are flocking towards cryptocurrencies including defi tokens. There are echoes of the 2017 ICO (initial coin offering) bubble when several new coins struggled after the initial rush. Defi tokens have also been witnessing sharp volatility as more such coins enter the market.