A New Age

In the last couple of years, the discourse around cryptocurrency has boomed. ‘Bitcoin’ and ‘Dogecoin’ have become familiar words. A cryptocurrency is a medium of exchange that is digital and uses encryption techniques to monitor the transfer of funds and control the creation of monetary units. Bitcoin is just one of the thousand cryptocurrencies that have recently garnered a lot of attention...

The wider recognition of cryptocurrency in India has been a huge step towards a more liberalised economy and society. Currently, over 7 million Indians have already contributed to over 1 billion dollars to the crypto world. Whilst there are still rumours hinting at a ban of cryptocurrency in India, and an already established cold war between RBI and the crypto sector, they are not stopping Indians from investing every day in Bitcoin, Ethereum and other digital currencies. If India wants to reach a more stable economy, it cannot overlook the 1.7 trillion dollars that exist solely for cryptocurrency.

Cryptocurrency could be a sensation much like the Internet in the 90s, providing a much-needed boost to the economy. The devastating impact of COVID-19 on the global market was startlingly evident in the last year and a half, reminiscent of the 2008 financial crisis. Despite this, crypto has been generating jobs across a variety of functions. As of today, over 300 start-ups have generated thousands of jobs and hundreds of millions of dollars in revenue and taxes, leading not only to more employment but also tech talent being engaged in the country.

Moreover, the usage of cryptocurrencies requires individuals to have access to the internet. Fortunately, trends in the development and usage of the Internet suggest that it will grow in the near future. The below bar chart aims to compare the user penetration rate from 2017 to, 2025:

Figure 1: Internet User Penetration rate of population % (2017-2025)

Without cryptocurrencies, trading and exchanging currencies is often a tiresome, time-consuming task, but could be easily avoided, making it easier and much cheaper. Cryptocurrency would further solve the problem of participating in international trade without having a bank account and help fight corruption as transactions are much more transparent and accessible to a larger audience.

These currencies also help fill up gaps that exist in the country’s current fintech industry and strengthen our monetary policy. Crypto technology permits faster, direct transactions by the users. It also helps users keep track of every digital transaction, which is far more advanced and effective than existing protocols. Secondly, Bitcoin can be used as an asset that sovereigns use to complement their national digital currencies. We can avoid instances such as mortgage fraud and other fraudulent activities through the usage of digital currencies.

A decentralized financial platform such as this could help India prevent financial downfalls such as the COVID-19 crash. Moreover, it would ensure that platform networks will not be blocked by any single state or country in times of national distress or conflict.

Figure 2: Weekly Bitcoin P2P transaction volumes in India

As evident in figure 2, a positive response from the Government of India will help boost India’s fintech infrastructure and promote our digital India mission. The Ministry of Corporate Affairs (MCA) has made it compulsory for companies to disclose their transactions and investments in crypto made during the year and we expect the taxation rules to follow (source: Business Today) This is a positive indication as the regulation of cryptocurrencies signifies its official integration into India’s finances; implying that it can now be used widely for day to day activities.

Although it is evident that the government has some limitations in the digital currency sector, it is certainly working on its own cryptocurrency. The creation of an Indian cryptocurrency may create a much-needed boost for the digital infrastructure of the country, propelling us towards potential financial growth and prosperity!

Author- Kanak Modi