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Matter of time before Indians have legal access to crypto: HDFC Bank report

Cryptocurrencies can be a hedge against sharp movements in other asset classes, but the volatility they experience is a bit of a dampener. However, with central banks stepping into the crypto game, this is a space that needs to be watched closely, HDFC Bank said in a report.

In the report titled “Cryptocurrencies: Fad or Forever?", HDFC Bank’s treasury research team led by its chief economist Abheek Barua said that it is just a matter of time before Indian investors have legal access to crypto plays.

The report, from one of the biggest lenders in India, has come at a time when there is ambiguity over crypto regulations. While the Supreme Court in March last year had overturned the Reserve Bank of India's ban and allowed lenders to extend banking facilities for such transactions, the central bank recently informally asked banks to stay away from businesses dealing in cryptocurrencies.

Financial institutions such as ICICI Bank, Yes Bank and Paytm Payments Bank have severed ties with the crypto sector.

Meanwhile, the Indian government is in the process of formulating a bill on cryptocurrencies.

Moreover, in terms of portfolio diversification, the HDFC Bank report was hopeful that like gold, bitcoin can evolve into a major asset class. “We find a positive correlation between gold and Bitcoin’s daily returns. Though the correlation was weak to start with but it has been rising… from a portfolio diversification perspective it has the properties of being a good hedge," the report added.

However, the report warned that a strong correlation between bitcoin prices and google searches indicates that it is perhaps more of a fad.

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