By Aman Shah
Indian business conglomerate Reliance has also been struck by the recent world-market trend, crypto (currency) mania. This idea is under implementation in Reliance Group’s subsidiary Reliance Jio Infocomm Ltd. As reported, the company plans to hire 50 young professionals with the average age of 25 years to a team headed by Mukesh Ambani’s elder son Akash Ambani.
Markets have been flooded with the cryptocurrencies (most famously, Bitcoins) following the blockchain technology boom. One may buy, sell, hedge as well as speculate these coins just as equity shares. But the main difference is that equity shares are backed by some assets of the company whereas crypto-currencies aren’t. Since the prices are soaring new highs and annual returns are going as up as 2000 percent, it is obvious that these non-government-guaranteed currencies will catch the eye of such conglomerates.
Why is Jio planning a JioCoin?
Reliance Jio had disrupted the Indian telecom market in 2016 by offering services at hyper-competitive prices and forcing all other market players to do so. The company has been revolutionary since the times of its founder Dhirubhai Ambani. Dhirubhai made mobile phones as well as call rates affordable to the common man of India by stating his sutra “Kar lo Duniya mutthi mein.” The way shown by him was followed by his son Mukesh Ambani in 2016.
Reliance has made its image as a key player in providing products at affordable prices. It has followed a trend of entering the existing markets with great potential and super-competitive prices as seen in telecommunication as well as oil sector. Jio did the same by arriving all of a sudden and gaining a significant market-share within a year. Now when prices of key cryptocurrencies have gone up as high as thousands of dollars, Jio plans to encash its image and a sector with a very high demand for affordable crypto-currencies.
The company may plan to trade the crypto-currency in the market by first issuing the coins in the primary market and by simultaneously trading it in the secondary market, assuming the position of a market maker. Jio may also use JioCoins to reward its employees as its present system of loyalty points.
Which companies are following the trend?
Last week, the former photography giant Kodak declared to issue its own crypto-coin named Kodakcoin on January 31st. The stock prices of Kodak took a sharp rise on January 8th and it tripled in two days. Kodakcoin will use the Ethereum blockchain platform. The IPO for these coins has been renamed to Initial Coin Offering (ICO) which is due on 31st January 2018.
The parent company of Google, Alphabet Inc. has invested millions and is one of the top investors in the blockchain technology. Alphabet Inc. has had very few investments in cryptocurrencies. Financial giant JP Morgan has also invested in the blockchain technology despite its CEO Jamie Dimon calling Bitcoin investors “stupid”.
What is Indian Government’s stand on this trend?
In December last year, RBI issued a warning against investments in Bitcoins. Also, it had explained security-related risks associated with investments in this technology. The central bank has shown concerns about the Initial Coin Offerings (ICOs) issuing entities. The RBI, however, hasn’t taken any regulatory stance against these currencies. The Income Tax Department has conducted online survey operations at Bitcoin exchanges for possible tax evasions.
Securities Exchange Board of India (SEBI) said on 20th December that if Bitcoin or other crypto-currencies are considered as commodity derivatives, SEBI might regulate it. SEBI is predicted to follow international regulatory agencies like Securities and Exchange Commission (SEC) of the US. The government’s stance on JioCoins is yet to be comprehended entirely, but one should not overlook Jio’s capability of corporate lobbying for its cause.
What must we expect?
Indians may expect a sudden supply-demand balance in cryptocurrencies when Jio officially launches affordable JioCoins. The present bullish market suggests that the stock prices of Reliance may see a sudden rise as seen in the prices of Kodak when it issued Kodakcoins.
Airtel, Amazon, Bookmyshow and many other companies followed the trend set by Paytm in the payment wallet industry. A similar pattern may arise when JioCoins are launched, as many companies may follow the trend. There are two questions whose answers cannot be predicted yet: Will the government ban the use of cryptocurrencies? And will any other company launch its coins before Jio does and gain a significant market share? We can only wait and see.