The head of Zebpay – formerly India’s largest exchange – estimates 40,000 BTC will flood markets if India bans crypto outright.

The good news is that Ajeet Khurana doesn’t believe this will have a terminal effect on the BTC price.

Overnight news emerged from a court case in India that the Government will introduce the controversial Bitcoin ban bill in the December – January parliamentary session.

Among the most draconian anti-crypto legislation in the world, the bill will punish anyone who trades, mines or holds cryptocurrency with up to ten years in prison.

In the petitions praying for Ban or regulation: Govt. submitted draft regulation before the Court which was submitted to it by Garg Committee. Govt. requested the Court to adjourn the matter till January as the it intends to introduce the bill in parliament in winter session. — Crypto Kanoon (@cryptokanoon) August 8, 2019

Khurana had formerly been of the opinion the Government would not ban crypto, but (speaking before last night’s news) he said all indications now were that it will – though he expects the parliamentary process will smooth off some of the most severe aspects of the legislation.

“What is likely to come out is fairly strict regulation,” Ajeet said.

“The Government will make available an opportunity for you to exit (cryptocurrency).”

Zebpay still has two million customers in India, holding cryptocurrency in wallets on the former exchange.

But with limited options to trade crypto for Rupees in India, local investors face a complex task in turning their cryptocurrency back into fiat.

Indian residents are allowed to remit up to $250,000 from overseas each year.

Zebpay was two-thirds of Indian crypto market

Zebpay accounted for around two-thirds of all cryptocurrency trading volume in India and based on his inside knowledge, Khurana estimates the total amount of legitimate Bitcoin in “light pools” in India to be around 40,000 with an unknown amount – perhaps another 20,000 BTC – in black market “dark pools”

He says the total value of other cryptocurrencies in India would be about 1.5 times that of Bitcoin. This would also hit markets in the event of a ban.

Fortunately, although Khurana believes the sell-off of almost half a billion worth of BTC would create some downward pressure on the price, he doesn’t believe it would be too bad if spread over a number of months.

He points to the example of 21,000 BTC being purchased on three exchanges (7000 BTC each) earlier this year when BTC was around $4500, which only pushed the price up 10%.

“So if that is the case, and we’re talking about double of that but spread across 90 days, it may not do much because of the sheer volume. It may have a dampening effect on the mood. ”

“I think the market has the capacity to absorb a few thousand per day without slippage.”

Zebpay forced to move to Malta and Australia

India has been wary of cryptocurrency for some time, and Zebpay was forced out of the country after the Reserve Bank of India banned banks from working with exchanges.

At its peak, Zebpay was turning over as much as $20 million of crypto a day – though the median volume was closer to $3 million a day.

That’s still a long way ahead of the $1 million volume Zebpay made in its first month in Australia.

“It has been phenomenally difficult,” he said of starting again from zero in Australia, likening it to being an Indian Ph.D. holder who has to start over in a new country from kindergarten.

Doubling volume every month

“When you’re starting from zero, it’s very easy to grow fast. We decided that for the roughly the next four to six months, we need to double our volumes every month. So we managed that from May to June,” he said, adding that monthly volume had hit $2 million.

He said the move from India meant they’d had to scale back the customer support team from 350 people, and the core team from 100 down to 70.

Most are based across two cities in India, with Ajeet himself in Singapore.

Indian and Australian cryptocurrency investors behave very differently as well he said.

“Each transaction (in India) is about one-eighth to one-tenth of what we are experiencing in Australia. Having said that, turnover is very high so they probably do eight to 10 times the number of transactions.”

Zebpay is currently operating in Australia using an OTC model they call Instant Buy Sell.

Khurana said that although they run an order book in Malta, they need to build up the volume and frequency of transactions in Australia first.

We don’t need no market makers

Most exchanges ‘fake it until they make it’ with market makers firing transactions back and forth to give the illusion of volume. Khurana said that’s a losing strategy.

“While it looks pretty on CoinMarketCap the fact is there’s no business happening… and you can’t stop it because then people will wonder why your volume dropped,” he said.

He estimates the Australian order book will be up and running within a few months, certainly within 2019.

Zebpay is currently the only exchange to provide Lightning Network integration.

Khurana is also interested in setting up a wholesale crypto fund. He’s interested in a retail’ ETF too, but that’s currently not permitted.

“A wholesale fund, that will be something very attractive for us,” he said.

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Meanwhile, back in India…

Khurana said he believed the Committee proposing the crypto ban “tend to take a hyper-conservative view because they cannot be seen as those who permitted fraud or Ponzi schemes to happen”.

But he believes the roughest edges will be smoothed off as it goes through Parliament.

“The extreme case, which would cause you to go to jail, these things could be tempered down a bit.”

“Then what happens is you release it into the economy and you find that it does not necessarily work as well as you wanted it.”

Ajeet believes it will take two to four years before the legislation is refined, but in the end, he thinks the country will embrace the opportunity.

“What I have found in my previous experiences with all innovations coming into the financial sector or technology sector, is that eventually, India turns reasonably liberal,” he said, adding the Indian Government will realize it is missing out on opportunities and that other countries and international bodies are only seeking to regulate crypto.

“They are not about banning it. They are about regulating it in a fashion akin to how banks are regulated. A lighter version of that, maybe, but something along those lines.”