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We’ve all heard what digital currencies are and how it has started impacting our lives nowadays. Besides, many industries are slowly considering it as a form of payment in exchange for goods and commodities. The well-known cryptocurrency of all times, Bitcoin, is the most recognized and pioneer term in the crypto world. This provides dominance over other cryptocurrencies, also called altcoins.
Just like other celebrities, Indian celebrities have also shown interest in the crypto industry. Recently, Indian Bollywood star, Amitabh Bachchan, plans to launch his non-fungible tokens (NFTs) on the BeyondLife.club platform. Limited edition artworks centered on him will include posters autographed by him.
Other famous personalities, including Shilpa Shetty, Vir Das, R. Madhavan, Huma Qureshi, and Neha Dhupia, have also found the new age money intriguing.
A Faith of Leap in Cryptocurrencies in India
Cryptocurrencies, especially Bitcoin, have gradually but surely affected everyone. But What’s the story behind this decentralized, digital currency whose creators’ whereabouts is a mystery? 650,000 Bitcoin transactions are processed daily as of July 2021. What sets Bitcoin apart in this flourishing cryptocurrency industry and where new cryptocurrencies are created regularly?
The major benefit of Bitcoin is its network impact and verified security. With more exchanges, retailers, software, and hardware supporting Bitcoin, it is becoming more widely available. It boasts the strongest developer ecosystem of any cryptocurrency, with the most applications and implementations. And now you see why it is so effective.
India, with the world’s second-largest population, is the second country in line with growing crypto adoption among other countries in Asia. While a non-representative sample indicates 30% adoption, it is doubtful that this correlates to the almost 280 million adults represented by this slice of the population.
Remittances, on the other hand, are the most likely cause of this country's high prevalence of crypto, as India has the world's largest expatriate community, making it the world's number one remittance receiver.
Bitcoin (16%) is the popular digital asset owned by people in India, followed by Ripple (8%), Ethereum (6%), and Bitcoin Cash (6%). Men in India are far more likely than women to hold Bitcoin.
Interestingly, young adults are the most likely to hold Bitcoin with 32% of those aged 18-24 investing in cryptocurrency, followed by 29% of those aged 35-44, 27% of those aged 45-54, and 25% of those aged 25-34 and 55-64.
Bitcoin sales profits can be taxed as company income if exchanged regularly, or as capital gains if retained for investment purposes. Since the Reserve Bank of India (RBI) is yet to award Bitcoin or any other cryptocurrency legal currency status in India, no explicit laws are governing how these cryptocurrencies should be taxed.
A Brief History of Cryptocurrencies in India
In 2018, the Reserve Bank of India (RBI) barred all licensed banks and other financial organizations from trading with digital currencies, citing worries about illicit activities and a danger to financial stability.
Indian Finance Minister Nirmala Sitharaman also issued a statement in which she stated that the government does not consider cryptocurrencies to be legal tender or coin and all efforts will be made to eliminate the use of these crypto-assets in financing illegal activities to promote a healthy crypto ecosystem. Furthermore, the government will not accept it as a form of payment.
The S.C Garg Committee suggested a ban on all private cryptocurrencies in February 2019, claiming that private companies cannot serve the role of a currency that has no inherent value.
However, in March 2020, the Supreme Court of India revoked the RBI 2018 circular, ruling that the prohibition was unconstitutional. Later in May 2021, the RBI stated that banks like HDFC Bank, ICICI Bank, Yes Bank, and State Bank of India can’t cite the 2018 circular for denying cryptocurrency trading services. However, can carry out customer due diligence under existing laws.
The Government Imposed Cryptocurrency and Regulation Of Official Digital Currency Bill, 2021
Since the Supreme Court overturned the RBI’s crypto prohibition, cryptocurrencies have thrived in the country. The government introduced the Cryptocurrency and Regulation of Official Digital Currency Bill in 2021 in response to the rising interest in cryptocurrencies.
With limited executions, the law proposes to restrict all private cryptocurrencies in India to promote the underlying technology of blockchain, cryptocurrency, and its application. In addition, the RBI will introduce an official digital currency.
The much crypto bill, on the other hand, was not introduced during the Monsoon Session of Parliament as the government maintained negotiations with stakeholders.
Cryptocurrencies: What It Holds for the Indian Economy?
According to Nischal Shetty, CEO of WazirX, an India-based cryptocurrency exchange, the delay in bringing the crypto law shows that the government is not in a hurry to make a decision. The government appears to be taking a cautious approach to the subject as the country's crypto community continues to develop quickly.
Even though the law is delayed, the government repeated its 2018-2019 stance in a written response to a question in the Lok Sabha during the Monsoon Session that cryptocurrencies are not recognized legal currency or coins, nor are they part of any payment system. And that steps would be made to prevent unlawful actions related to the usage of crypto assets.
The government’s continuing investigation over the use of blockchain technology for enrolling in the digital economy is a good sign.
The proposed bill is significant because it is related to both money and technology. Moreover, it is a great indicator that the government is taking its time to study the technology before making a sudden decision, as well as considering stakeholder’s perspectives to come up with a conclusion.
The Finance Minister of India, Nirmala Sitharaman, also announced several times that the government is willing to provide a window for experimentation to understand better the value of technology to boost innovation in the fintech industry.
"My view on this is that of course the Supreme Court had commented on cryptocurrency and while the RBI may take a call on official cryptocurrency but from our side, we are very clear that we are not shutting off all options," she told.
Nirmala Sitharaman, the Finance Minister, opines that individuals will be given ample opportunities to experiment with blockchain, Bitcoin, and cryptocurrencies.
"A Cabinet note is being prepared. It's almost nearing completion and then it will be taken to the Cabinet... we will allow a certain amount of window for people to experiment on blockchain and Bitcoin. However, the formulation of cryptocurrency will be part of the Cabinet note which will get ready soon," she said.
It is likely that the government will not ban cryptocurrencies, but may come up with satisfactory rules and regulations.
The appointment of tech-friendly ministers like Ashwini Vaishnav and Rajeev Chandrasekhar in the recently expanded Union Cabinet would bring favorable policies for the Indian crypto community.
The Rise of Cryptocurrencies in India’s Small Cities: Reports
According to reports from regional media sites, cryptocurrency usage and trade are being welcomed by Indian residents as a means of investing and obtaining more money during the COVID-19 epidemic.
What's more fascinating is that this rise is even more pronounced in small towns, where interest in cryptocurrencies is said to be at an all-time high.
WazirX crypto exchange observed an incredible number of new clients arriving from these small cities classified as tier-2 and tier-3. According to the exchange, user signups from these cities have increased by 2,648%.
Nischal Shetty, CEO of Wazirx, told the India Times:
Tier-2 and tier-3 cities have driven almost 55% of total user sign-ups on Wazirx in 2021, thereby overtaking tier-1 cities, which demonstrated a sign-up growth of 2,375%.
The areas of new users are shifting, as are the profiles of new cryptocurrency investors.
India’s Investor Profile Is Shifting
This fresh surge in the number of people in the Indian crypto ecosystem is altering the characteristics of an ordinary cryptocurrency trader. The majority of the fresh blood is under the age of 35 and holds a degree. According to a local exchange report, more than 90% of new investors are IT professionals, MBA grads, engineers, and startup founders.
According to Wazirx's CEO, they have sold over $108K in NFTs on their local market. Because of the increased demand for cryptocurrency and restrictions, exchanges have begun to provide new ways to invest such as peer-to-peer (P2P) marketplaces to circumvent regulatory monitoring.
These new traders are more likely to shift away from traditional assets such as Ethereum and Bitcoin, and move toward new cryptos such as Cardano, Solana, and Dogecoin.
Conclusion
Looking at the mass interest, it is apparent that the crypto market opinions are aligned with the belief that digital currencies are the way towards the future.
However, the Indian government is closely monitoring the crypto sector and encouraging people to be cautious when experimenting with blockchain and cryptocurrencies. The administration has not closed all possibilities but is taking steps to limit its misuse and criminal use. Perhaps a new framework for cryptocurrency legislation will emerge.
CITATION
- https://dvh1deh6tagwk.cloudfront.net/finder-us/wp-uploads/sites/5/2021/06/Crypto_Adoption_final-compressed-1.pdf
- https://www.businesstoday.in/crypto/story/amitabh-bachchan-to-launch-his-own-nft-collection-in-november-305596-2021-08-31
- https://www.compareremit.com/money-transfer-guide/is-the-future-of-digital-currency-on-hold-in-india/
- https://www.indiatoday.in/business/story/not-shutting-all-options-on-cryptocurrency-says-finance-minister-nirmala-sitharaman-at-india-today-conclave-1779328-2021-03-15
- https://economictimes.indiatimes.com/markets/cryptocurrency/crypto-craze-catches-on-in-small-cities/articleshow/86335513.cms