The global cryptocurrency market size was estimated at USD1.49 billion in 2020. The markets is poised to grow at a CAGR of 12.8% between 2021 and 2030. India has a significant 15 million investors in this asset class in spite of the ambiguities surrounding its legality 1.
The Lurking Fear
The increase in the users brought with it the alarming rise in crypto assets theft and hacking. Cryptocurrency hacking and theft cases rose by 28.38% in 2019-2020. Even Elon Musk was not spared as scammers impersonated his identity to steal over USD 2 million in 2020. Probably the biggest heist occurred in August, 2021 when crypto hackers penetrated the crypto trading platform Poly Network and stole crypto tokens worth USD 610 million3.
Non-Regulation: A Cause for Concern
Cryptocurrency is more prone to such theft and hacks as it is not regulated. World over, countries and regions are divided on the legality of these currencies. While most countries recognize the trading in cryptocurrencies as legal, they do not consider such currencies as money. Some countries such as Great Britain, Singapore and Canada have brought in regulations to regulate these currencies; there are few others who are proposing regulations such as USA, Pakistan and Brazil. Some countries have banned these currencies such as China, Bangladesh and Algeria10. India is yet to take a stand on this as the Government mulls over a Cryptocurrency Bill to regulate the cryptocurrency market11.
Digital and Safe
The growing concerns of the investors to thefts and hacks needed immediate attention and action. This triggered the popularity of “cryptocurrency wallets” that offer protection and security to crypto assets. Crypto wallets are similar to a “Bank Account” for fiat currency or a “Demat Account” for securities.
Forms of Cryptocurrency Wallets
There are two forms of wallets depending on where one wants to store:
Hardware and Soft Wallets
“Hardware Wallets” – Meet the Ledger4, hardware wallet which stores the private key (key that is used to authorize block chain transactions) in a secure hardware device which is Bluetooth compatible. Hardware wallets are physical devices that enable storing of private keys in an offline form, reducing the chances of hacking6.
“Soft Wallets” – Such as the “Coinbase Wallet”, which is a mobile app that stores all crypto assets. Added to that you can trade (buy and sell) crypto currencies using the app. Software wallets are available in three forms – those that are compatible with desktop or ones with mobile or those that enable storing online7.
Hot and Cold Wallets
Yet another way classification is based on the ease of retrieving the tokens from the wallet. There are thus “Hot Wallets” that are stored online and so are easily accessible for conducting transactions. The downside, they are also more vulnerable to hacks and thefts. “Cold Wallets” are not intended for regular use.
The Desi Wallets
WazirX is one of India’s largest cryptocurrency trading portal. It not only offers trading in various cryptocurrencies, but it has its own crypto token called “WRX Token”. In addition to being a trading portal, WazirX has its own bit coin wallet that is considered as a secure and trusted wallet since it has a 2factor authentication built in8. While WazirX is a software wallet, Etherbit9 is crypto gadget store that sells are forms of hardware cryptocurrency wallets. The store has partnered with crypto wallet makers such as the Ledger, SafePal, Cryptotag, ShiftCrypto, Cryptosteel etc.
While on the one side the uncertainty on the regulatory and legal stance for cryptocurrencies in various countries persists, the players in the market are optimistic with the security wallets and other measures in creating a secure and trustworthy environment for investors.
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How far do you think cryptocurrency wallets will aid in promoting the market for crypto assets?
1. Economic Times Editorial (2021). From gold to crypto, Indians seem to be changing preference. Economic Times E-Paper, July 09, 2021.
2. Finextra (2021). Cryptocurrency theft on the rise. Finextra.com. March 02, 2021