On February 1st this year, the Indian cryptocurrency community chorused in dismay at the announcement of 30% taxes on income from virtual digital assets. A few weeks later, #reducecryptotax was the buzz all over Twitter.
Some people, however, considered the taxes to be a step towards legalization and celebrated the elimination of the worst-case scenario — a blanket ban. From a possible ban to regulations, the move could be an advancement towards greater adoption. The emotions were mixed and the questions were many.
India’s Cryptocurrency Journey
When cryptocurrencies first started gaining momentum, India followed suit and several citizens decided to hop onto the trend — some investors, others are speculators.
In 2019, an outright ban was imposed on all crypto-related activities including buying, selling, hodling, and even mining. The order, however, was lifted by the Supreme Court in March 2020 in favor of regulations.
Then came the anticipation of a cryptocurrency bill.
The Union Budget 2022 cleared the air by announcing the tax policy. Along with the regulations, the government announced the launch of the Digital Rupee, in essence, a Central Bank Digital Currency (CBDC).
This announcement was welcomed by the crypto community and was seen as a green light for the adoption of cryptocurrencies. In reality, however, crypto legality still remains a mystery.
Despite the skepticism and regulations, investments in the space have seen exponential growth as investors continue to move towards crypto.
The rising number of cryptocurrency investors suggests a shift in the investment standard in a country that is known to invest in safer commodities such as gold. India has come a long way in reshaping financial access using virtual mediums.
How Cryptocurrency Can Be Advantageous to India
A decentralized global financial system can have a tremendous impact on supporting the growth of developing countries. Financial inclusion enabled by cryptocurrencies can create a level playing field and ensure the spread of economic growth across all countries.
Let’s explore some other ways in which India can benefit from the mass adoption of cryptocurrencies:
- A study by Illinois News Bureau revealed that despite the various financial inclusion initiatives, more than 190 million Indian citizens still remain unbanked, making India the second-largest unbanked population in the world. From high service fees to tedious banking mechanisms, a myriad of reasons keeps the poor from availing of formal financial services. Cryptocurrencies, on the other hand, can improve financial access by enabling anyone with a decent internet connection to invest, trade, and transact in crypto. This sets the stage for widespread financial inclusion.
- Decentralization eliminates the need for financial intermediaries and provides opportunities to create fairer financial markets that are accessible to everyone. Cryptocurrencies are a decentralized and distributed architecture, and by design cannot have any single point of failure.
- India has recently begun fully digitizing bank accounts. Unfortunately, this gives rise to various security vulnerabilities. Blockchain transactions allow people to own their data by the use of public and private keys, thus eliminating the occurrence of data breaches.
- The speed of cryptocurrency transactions significantly improves efficiency. With no room for mix-ups and the provision to make multiple transactions at a time, business becomes faster and more convenient. The distance between the sender and receiver becomes irrelevant, and transfers are hassle-free.
- The launch of Central Bank Digital Currencies across the globe will inevitably create a market for international remittances. A CBDC in India may help India seize the golden economic opportunities that arise in the future.
- A borderless financial system will facilitate the smoothness of transactions. With a centralized system, any international remittance has to be confirmed by a nodal bank, which increases the cost of remittance. With an average 6.30% transaction fee and a one-week transfer period, the need for a global system becomes all the more evident. Cryptocurrency transactions are much more economically efficient, reducing the cost and speed of such transfers.
The Rise of DeFi and Emerging Opportunities
Decentralized Finance or DeFi has become one of the most vital aspects of a booming crypto economy. It offers an alternative to an opaque, strictly controlled monetary system, and gives control to its users.
The need for centralized authorities is eradicated, and the risk of human error is minimized.
With a growing IT industry, India has several opportunities to get involved in the development of the DeFi ecosystem. The total value locked in DeFi is already worth more than US$ 75 billion and the segment is attracting a lot of funding to evolve quickly.
Some global ecosystems are bringing contemporary approaches to radically change the crypto world. One such platform is MRHB which uniquely stresses ethical principles and guidelines to ensure sustainability. The platform and its services are offered to consumers interest-free to help create social equity through an efficient halal system.
MRHB is striving to bring halal crypto to the fore with community-focused services into the world of decentralized finance.
The Steady Growth of Crypto in India
The gradual acceptance of cryptocurrency in the country has been remarkable.
India is currently on the cusp of a ground-breaking digital phase. Financial bodies are also working on creating a progressive regulatory framework that will propel cryptocurrency’s legalization forward. Building a framework will create a stable crypto ecosystem and expand financial inclusion in India in a simple and secure manner.
The lucrative potential of cryptocurrencies is now well recognized in India and is helping to make it an innovative tech powerhouse. The global cryptocurrency market is predicted to triple in size by 2030.
The benefits — including safeguarding national security, deterring monetary fraud, and job creation — are promising. Endless opportunities with a positive impact on the Indian economy can arise with the proper establishment and incorporation of cryptocurrencies.
With a decentralized financial ecosystem, the future and evolution of cryptocurrencies in India look bright.