How a Crypto-Relief Fund Provided Aid In India's Fight Against COVID-19
by Shriya Bhaumik, Research Analyst at Moving
It would be an understatement to say that the novel coronavirus (COVID-19) has upended life as we know it across the globe. The blockchain and cryptocurrency industry is famed for its volatility, but it saw and continues to see an even wilder side to it during the pandemic.
Cryptocurrency & Its Rise During the COVID-19 Pandemic
COVID-19 has had a tremendous impact on the financial markets. In the face of such economic extremities, cryptocurrency has been comparatively stable and accessible due to the rapid spread of digitization and the popularity of high-speed internet across continents. The lack of centralized management positioned it as a hedge against inflation, an eventuality, and made it akin to gold but digitally. The value of Bitcoin increased from $7000 in January to $17,000 in November of 2020. This is partly due to its demand rising whenever it nears its maximum limit. This increased demand and limited supply push its value upwards. A few reasons attracting people to cryptocurrency are its resistance to fraud, identity theft, little to no transaction fees, and instant transactions. Compared to traditional assets, whose value can be predicted to a large extent, cryptocurrency is largely volatile. Therefore, investing in it has become popular, especially over the last year due to its unpredictability, similar to the stock market, resulting in sometimes massive growth in its value. When Bitcoin launched in 2017, its value was $100, and now, in 2021, it hit an all-time high of $62,000. This growth is enough for the public to try their luck.
The popularity of cryptocurrencies can also be credited to a large majority of the Indian middle class losing their employment due to repeated lockdowns in the country, leading them to invest in cryptocurrencies to maintain income. The rise in crypto influencers on social media and the popularisation of the topic by notable personalities such as Elon Musk also added to the hype. Moreover, with the advent of the coronavirus, investors worldwide became aware that only relying on stock markets is especially shaky as there is a major dependence on companies, who oversaw to run into major losses during the pandemic.
While the first wave of the coronavirus hit India slowly and unrelentingly, the second wave was sudden and caused a tremendous impact on Indian families beginning from April of 2021.
Using the prevalent adoption and popularity of cryptocurrencies, some of India’s best minds in crypto and blockchain came together to help patients and their families survive the financial strain which came along with the failure of the Indian healthcare system. This led to the formation of the COVID-19 Crypto-Relief Fund in India.
COVID-19 Crypto-Relief Fund: What is it and How does it work?
What is it?
In April, during the second wave, India began dealing with colossal shortages in medical supplies such as oxygen cylinders, medicines, and hospital beds. Record-breaking deaths taking place in a single day are attributed directly to these shortages.
On April 24th, Sandeep Nailwal, the co-founder of Polygon, tweeted that he will start setting up a COVID-19 Crypto-Relief Fund in response to the devastation caused by the virus to families and the inability of the healthcare sector to provide amenities to all those affected. The donations made to the fund would provide the necessary healthcare and essential items to those struggling to fund it themselves. Nailwal’s Polygon is a company that connects and builds Ethereum based blockchains which gave him the necessary expertise to run a relief fund accepting cryptocurrencies as its donation.
Some major features of the COVID-19 Crypto Relief Fund other than its philanthropic aspect are its complete transparency, regulation compliance, and distribution of funds which Nailwal took complete responsibility for. Nailwal, with the help of volunteers, set up the fund and extensively looked into bypassing regulatory concerns and recovery of foreign donations. Donations accepted within the relief fund aside from Bitcoin are popular cryptocurrencies such as Ripple, Litecoin, Ethereum, etc. Records of the contributors are entered into a google form, and basic information on the donors is stored if there is a requirement to get in touch. International coverage led to massive international support leading to Indian regulators fearing money laundering and a growing crypto-relief fund that wasn’t easy to convert into a currency used on the ground.
Within four days of the launch of the relief fund, the account accumulated $1 million. Co-founder of Ethereum, Vitalik Buterin, Former Australian cricketer, Brett Lee, and Balaji Srinivasan have all donated to the fund.
How does it work?
The COVID-19 Crypto-Relief Fund consists of an address that is maintained via Ethereum. Cryptocurrency investors from around the world send in their donations to this address and then, consequently, liquidate it through international crypto exchanges. This Crypto-exchange, in turn, converts the money into a fiat currency which is returned to the Fund. It is then transferred from a bank account connected to the exchange to a Dubai-based bank. The bank in Dubai sends the money to Nonprofit organizations that are FCRA compliant and adhere to guidelines set up by the Government of India. These guidelines adhere to the government’s policy on nonprofits and their receipt of foreign aid. The donations received by the Fund are publicly mentioned within spreadsheets on their website.
The Legality surrounding Cryptocurrency
In May 2021, the RBI released a circular upholding the Supreme Court’s judgment wherein it was decided that banks and lenders could not deny their services to people who dealt with cryptocurrency. However, even though this circular was released, the RBI has informally asked banks and lenders to sever ties with cryptocurrency traders and exchanges. On top of this, the acquisition of foreign aid via cryptocurrency is also looked down on with wariness amongst regulators.
Currently, the government is looking to pass regulations on cryptocurrency and implement its own digital currency, Central Bank Digital Currency (CBDC), backed by the RBI. However, these steps are strongly opposed by the majority in the cryptocurrency industry.