One can claim that when Satoshi Nakamoto invented Bitcoin, India could have been one of the first countries to establish its reliability and trustworthiness as an alternative financial system. Countries, across the world have made efforts towards developing a secure and efficient system for transacting in this new form of currency, with a view that in the near future cryptocurrency is highly likely to rule the world economy. Reviews on user cases have shown good profits on investment.
Besides going into the details of what future cryptocurrency has in Indian markets and among the masses, it is important to know that the Government of India can now regulate and confirm their use in the mainstream economy. This blesses it with the allowance to get exchanged with other forms of property holdings and inventory. Taking example from other nations, this might as well fit perfectly for money gain taxes. Let’s see what are the various grounds which need to be looked at while stating a probable future of cryptocurrency in India.
Also read: Things you need to know about crypto trading
Cryptocurrency in India
In 2013, India announced Bitcoin as untrustworthy and labeled it as “Wild West Territory” where frauds and scams like Silk Road, market of drugs on dark-net are prevalent and where selfish greedy geeks conned innocent citizens into losing their money.
The fact to note is that India was not aware of its value at that time but as the nation went through a change in its global financial and political situation, its viewpoint towards cryptocurrency also changed. India has now become an ideal match for bitcoin and is ready to run for its position as the first country to strengthen its grasp on cryptocurrency.
Role of Cryptocurrency in India
On 8th November 2016, the Indian Government with assistance from the Reserve Bank of India (RBI) removed 500 and 1000-Rupees currencies from circulation, bringing 86% of the country’s money straight to ashes. The decision was taken as a step to crush its ever-growing dark economy and to get rid of never-ending illegal affairs.
Simultaneously, this verdict, though not intentional, taught the nation’s 1.3 billion people of the uncertainty that comes with holding cash as property. With a 7% fall in the stock market, cash scarcity and some serious adversaries faced by many citizens in the queue for exchanging their useless money, it didn’t take long to cause a nationwide hysteria.
This gave a significant setback to India’s economy and cryptocurrency, Bitcoin, in particular, which was already being used by several industries, witnessed a spike in its usage in India.
According to The Economic Times, by mid-2017, around 2,500 Indian investments were happening with Bitcoin on a daily routine. The digital money attracted people of India as it seemed a safer option for investing, that lay far apart from government rules and regulations and from political and economic disturbances.
India, still an unbanked nation
Despite being ranked as the 7th largest economy in the world with a GDP of $2.5 trillion, almost 190 million adults in India are still without a bank account and from the ones who have one, 50% have remained inactive for the year 2017-18 according to a statement by the World Bank in 2018. To get a feel of how huge this is, Russia’s population in 2017 was recorded as 144.5 million. This means the number of people in India without a bank is almost 1.3 times the whole population of Russia.
Along with many reasons for such a big fraction of nations not having a bank account, one major cause is the requirement of a form of identification and a permanent address proof which, for many homeless Indians, is not possible to have. This section then clearly relies on cash transactions to sustain their livelihood.
Now, Bitcoin, in this case, can turn out to be a great success as it provides a method of transacting and making deals across the globe cheaply and securely without requiring a bank account. No doubt, as of now, more than 5 million Indians own cryptocurrency in some or other form which accounts for thousands of crores, according to Nischal Shetty, founder and CEO of crypto-exchange agency WazirX.
Bitcoin usage by Indian companies
In 2018, more than 500 merchants and several big companies in India, including Dell, gave an option of paying in cryptocurrency, as told by GBminers co-founder Amit Bhardwaj. Of course, Bitcoin still has miles to conquer before it can be labelled as ‘popular’ among Indians as most of us prefer direct money. But the numbers are increasing by each passing day. As already said, cryptocurrency now holds more than 5 million users in the country.
Stand of Indian Government on Cryptocurrency
The Reserve Bank of India (RBI) has continuously warned cryptocurrency users and traders about the risks associated with this new system, however, the Indian Prime Minister, Narendra Modi, indirectly gave a thumbs up to cryptocurrency on 2nd July 2018 with his ambitious picture of Digital India. Several meeting sessions have been held for discussing the scope of cryptocurrency in Indian economy and to formulate regulations and a proper system to govern this.
A while back in 2018, the government formed an inter-disciplinary committee to study the structure of digital currency and set up a forum MyGov to collect public opinions regarding cryptocurrency.
Post this, India’s Department of Economic Affairs arranged for a meeting to discuss regulation of Bitcoin and it was decided that cryptocurrencies too, should be regulated under The Reserve Bank of India Act 1934 as per which, investment in Bitcoin (or any such cryptocurrency) should be taxed and guidelines for such any transactions with virtual currencies should be properly drafted and Foreign Exchange Management Act 1999 (FEMA) should be extended to cross-border cryptocurrency transactions, by IRB.
Now, this whole discussion about future of cryptocurrency in India has recently become a hot topic as RBI filed a draft under the title “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019” for banning cryptocurrency from India and issuing as much as a 10-year imprisonment to those dealing, holding or selling cryptocurrency in any form. The press release by RBI regarding this matter says that:
However, on 4th March 2020, the Supreme Court ruled that the warning by RBI on banning cryptocurrency trading, in the financial institutions being regulated by RBI itself, was simply unconstitutional. This provides a green signal to dealing and transacting in cryptocurrencies like Bitcoin and Ethereum, however, the actual trading is still cloudy until RBI’s final announcement on the issue.
The Global Picture
As per the 2018 cryptocurrency statistics, the world market witnessed more than 1500 cryptocurrencies with over 9400 verified transactions. The estimated cumulative market value of all cryptocurrencies across the globe has raised up to $237.1 billion. Bitcoin shares as much as 40% of the cryptocurrency market holding a market price of 5,12,461 INR as of today.
With such a huge population of more than 1.3 billion people and an economy still growing and flourishing by the day, India holds a huge chance of success for cryptocurrencies. The economy of India is undergoing a complete renewal after the International Monetary Fund labeled it as the fastest growing economy. With over 600 million or 45% of its population having internet access, cryptocurrency has high chances of becoming an important financial asset in the near future.
The Future of Cryptocurrency in India
Cryptocurrency is now used to make online purchases or even physical products and hence provides a great opportunity for business holders and companies to monetize various digital applications. It is also a probable option for getting used in social networks, loyalty games and P2P networks. For online gamers, some offer reward cryptocurrencies for watching advertisements, taking informative surveys or winning social games. This helps to increase the use of cryptocurrency not just as a financial token but also as a marketing tool. This offer-based distribution of cryptocurrency by companies to users, who successfully complete a given task, allows the companies to establish efficient and secure loyalty schemes.
Till date, more than 8 million people in India have used cryptocurrency and the numbers are likely to grow exponentially in the coming years as a result of upcoming economic reforms. The fact that India is a great market for cryptocurrency such as Bitcoin has already been established and the Government of India seems to be ready to formulate a system for regulating cryptocurrency as part of the Indian economy. With so many companies and investors already dealing with and trading in cryptocurrency and the countless opportunities still remaining to be explored, little help and support from the government can turn cryptocurrency into a major asset for the Indian market in the coming future.