We all remember the time when demonetization hit India. Overnight, Rs.500 and Rs.1000 notes became illegal tender in the country. That was the time when digital payment methods and payment processor businesses started rising. And at the same time, the cryptocurrencies usage in India started increasing.
However, the RBI raised concerns over cryptocurrency usage, it released many circulars to warn the crypto traders and holders and even imposed a banking ban on it for almost two years, which recently has been revoked.
Before RBI, the Enforcement Directorate and the Income Tax Department of India started taking action against the businesses and individuals dealing in crypto. They believed that the businesses dealing in the cryptos were violating the foreign exchange and anti-money laundering regulations.
A report says that along with the central bank of India, the Government of India has drafted a bill for setting up a framework to regulate the cryptos in the country.
Although the RBI had issued several warnings against the usage of cryptocurrency, it still supported blockchain technology in India. It even released a Blockchain whitepaper in the year 2017 demonstrating how blockchain technology can help the country in its economic growth. RBI always felt that the implementation of blockchain technology would help the country in its economic growth.
The central bank even planned to release its own digital currency using the technology.
But when the RBI imposed banking ban on the cryptos, many of the Indian startups whether they were dealing in blockchain technology or in cryptocurrencies shifted their businesses overseas due to uncertainty from the Indian government.
The banking ban had snatched the growing opportunities from Indian startups, therefore, they decided to shift their business to those countries which offer favorable policies to them.
A few months ago, the Indian National Institute for Smart Government (NISG) did its research and released a document called ‘National Strategy on Blockchain.’
The draft it released describes the regulatory approaches, the Indian government could adopt for blockchain technology. It also explained that if the government prepares any regulatory framework then it should be based on its function and not on the technology.
In today’s time, the world is dealing with two crises .i.e., COVID-19, and Global Recession.
During this time when the whole world is fighting with the pandemic, many of the countries around the world have regulated the cryptocurrencies and exchanges. The approval from the authorities helps the exchanges to offer their services to the customers without any hesitation.
The main aim behind regulating the cryptocurrency and exchanges is to prevent them from getting involved in any kind of illegal activity.
It is not like the citizens can not deal in the crypto if it is not regulated but until then it would not be officially recognized by the country, like in India.
The crypto adoption in India is growing. Despite knowing the fact that the cryptocurrencies are not regulated entities in India, people are still using it. And ever since the banking ban has been removed by the Supreme Court, its business in India has gained a lot of traction.
Cryptocurrencies are comparatively still quite volatile than any other traditional asset class and that was the reason, earlier most of the institutional investors never tried to invest in it. But during the 2018 bear market, the volatility factor was significantly cut down which attracted even institutional investors to space. In 2020, OTC desks mainly catering to the institutional investors along with the crypto futures market has peaked all-time-high in the first quarter of this year itself.
India is the world's second most populated country after China and a country with the highest population of youths i.e majority of its population falls under the age of 24. With such a plethora of human resources at the helm, India has the potential to play a pivotal role in the adoption of a nascent technology like cryptocurrency and blockchain. Even now, when there is no certainty over regulations, many mainstream crypto firms and exchanges have not only shown interest in India but have invested heavily in the Indian crypto ecosystem.
Report from OKEx and local media houses suggest that the interest of the common public in digital assets have been on the rise. In fact, during the ongoing pandemic, the trading volume originating from India has seen a 500% rise from the pre-pandemic phase.
Binance, the world's leading crypto exchange acquired India's top crypto exchange WazirX. After the removal of the banking ban, Ripple, OKEx and many other crypto firms have started eyeing the Indian remittance and trading market.
India also faces a huge problem of brain drain where many qualified professionals move to other countries for better opportunities. Given, blockchain and crypto are quite nascent technology, timely intervention and right steps from the government can position India as a crucial player in the space.
Crypto adoption in India is on the rise currently, but it is still facing challenges, as the Indian Government has not given a proper decision. To open the opportunities for crypto adoption in India, the government should set a proper framework so that the exchanges and the startups in the country could work easily, without any hesitation.