Emerging Markets: Will India Catch Up With the Global Players In Cryptocurrency Investment?

Year 2020 was significant for the Indian crypto investor, as it was for the cryptocurrencies. But as more Indian investors are entering the pool, the Indian government is looking towards increasing regulation

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Even as you read this, the price of Bitcoin has probably appreciated significantly, as has been the case over the past few months. At the time of writing this article, one Bitcoin was being traded at nearly $50,000. But the story is not just limited to the most prominent cryptocurrency. It has been the same for almost all major digital coins, which witnessed mammoth growth rates in 2020, and the trend continues in 2021. The market cap of cryptocurrency has crossed over $1.5 trillion, making it a vital financial asset.

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India, too, jumped on the crypto bandwagon when the lockdown hit, as scores of new investors joined the crypto realm. Year 2020 was significant for the Indian crypto investor, as it was for the cryptocurrencies. But as more Indian investors are entering the pool, the Indian government is looking towards increasing regulation. In this entire hubbub, the most crucial question asked is ‘will India catch up with the global players in cryptocurrency investment?’

India and crypto

Before 2020, India was a passive crypto market, with only a handful of crypto investors. Moreover, most of them saw it as a financial asset, but not as a currency or an investment. They were more likely to sell off their stock as soon as they were in the positive. They had every right to be wary, as India was reeling with various crypto scams. From fake coins to Ponzi schemes and the promises of unbelievable returns, Indian investors had been burnt way too many times. Keeping the irregularities of crypto in mind, the Indian government in 2018, proposed a blanket ban on all decentralized digital currencies and introduced a regulated virtual rupee.

 

Even though the bill did not pass, the Reserve Bank of India (RBI) barred regulated financial institutions from providing services to businesses dealing in the exchange/trading of cryptocurrencies. This sent a wave of turbulence among Indian investors, and many jumped ship. But the Internet and Mobile Association of India challenged the order, and in March 2020, the Supreme Court scratched off the RBI’s directive from 2018. IAMAI has been working with crypto exchanges since 2018 to help them self-regulate and stay within the boundaries of Indian law. Even though India’s crypto investments have scaled up in the past one year with many new investors following in the footsteps of business leaders such as Elon Musk, the talk of banning these unregulated currencies has once again resurfaced in the country.

The crypto ban and the digital rupee

Three years after the initial consideration to impose a blanket ban on all cryptocurrencies, the Indian government is once again thinking of bringing a similar motion. However, to keep pushing for a digital financial ecosystem in the country, the proposal may include a digital rupee. This only-digital currency can be transacted for goods and services, both offline and online. The blanket ban on all cryptocurrencies is motivated by the decentralized nature of these currencies, which, simply put, means that there is no regulatory authority to oversee these digital coins. The government, however, is proposing a regularized currency, i.e., the digital rupee, which will be regulated by RBI.

However, the concept of banning all cryptocurrencies may not sit well with the Indian investors, and more so with the companies working to uplift the crypto ecosystem in the subcontinent. At the same time, it has helped people gain familiarity with cryptocurrencies. Since the news of the ban, trade volumes have soared in Indian crypto exchanges. Whatever the result, the Indian investor still waits patiently for any concrete decision from the Indian government. Till then we will see the number of investors increase with more people trying their hand at crypto trading and investment.

Even though the Indian crypto ecosystem had a sluggish start, it is safe to say that it has arrived. The ease of access in investing in crypto has been a significant contributor to this boom in the country, which is not going away anytime soon. The occurrence of scams has also reduced as investors gain more information about cryptocurrencies. Moreover, exchanges are now self-regularizing in a bid to attract new investors. As the crypto market increases its penetration in the country, India will surely catch up with the global players in cryptocurrency investment, provided there isn’t any governmental halt to its progress. Until then, investors and concerned individuals lie in wait for a decision that may change the landscape of the Indian crypto markets.

Edul Patel

Written By

Edul Patel is the Co-founder & CEO of Mudrex. Edul brings with him over 10 years of experience deep-rooted in finance, entrepreneurship, and building tech-driven applications. Previously Co-Founded Niffler, a $1Mn funded startup by SAIF partner. Niffler got acquired by Tapzo where he led the product team to build the core Infra and App.