Young Indians enamoured with cryptocurrency

Crypto exchanges are said to have splurged Rs.50 crore in advertising during the T20 World Cup. With renewed interest in crypto currencies and speculation around an impending Bill likely to be introduced in the winter session of Parliament, battle lines are drawn.

Cryptocurrency, a type of digital currency, exists in electronic form. Bitcoin and Ethereum are well-known cryptocurrencies, but there are many different cryptocurrency brands, and new ones are continuously being created.

The surge in crypto investments in India, from US $923 million to nearly $6.6 billion or roughly Rs. 49,189 Crore in May 2021 and which crossed US $10 billion earlier this month, is being fuelled by young Indians. According to Coinswitch Kuber, 50 percent of its investors are below 28 years of age.

Cryptocurrency research and intelligence company, CREBACO claims 105 million Indians today own a cryptocurrency, which could be a Bitcoin, Ethereum or any other altcoin. Altcoins are alternative cryptocurrencies that are not Bitcoin.

While India is still mulling about how to move forward, the Companies Act was amended in April to tax capital gains accruing from digital assets.

However, the Chief economist at Care Ratings and author of ‘Hits & Misses: The Indian Banking Story,’ Madan Sabvnavis is personally in favour of a ban on crypto. “We cannot have multiple currencies operating within a jurisdiction,” he says.

“In India, we surrender foreign exchange beyond a limit to the Reserve Bank of India and cannot buy goods and services domestically with dollars or euros. But one can today pay for hotels in Thailand or insurance in Switzerland with Bitcoin. If everyone uses cryptos for transactions, monetary policy would become superfluous,” he maintains.

The anonymity of use ensures that the identity of the ‘payment-maker’ remains anonymous. Such currencies therefore are likely to be misused and t ‘it would be injudicious for governments to legitimise cryptocurrency’.

Prominent Cryptocurrencies:

• Bitcoin

• Litecoin

• Ethereum

• Zeash

• Stellar Lumen

• Chainlink

Industry sources however argue that crypto is not a currency. It is an asset they say—crypto is not just about exchanges or investments. Blockchain technology (powering crypto) allows people to use the Internet without losing privacy and is seen as a game-changer across major industries, including healthcare, agriculture, and financial services. The Indian crypto industry follows strict regulatory measures, they reassure.

Former Finance Secretary Subhash Garg, who had headed an inter-ministerial committee (IMC) that drafted the ‘Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019,’ however is sceptical.

“Besides crypto being potentially misused for hawala and money laundering, investments worth billions of dollars are escaping from the country and capital gains tax being avoided by exchanges as well as investors,” he says. “We have so much regulation on foreign currency exchanges but we have no regulation on crypto exchanges,” Garg adds.

Vikas Ahuja, CEO of CrossTower India has a different take. With the right policies, India is poised for a revolution in information technology and improve Indians’ quality of life.

“With the Indian government’s plans to present a crypto regulation bill in the parliament’s winter session, we look forward to it and hope to see a balanced approach – allowing innovation while at the same time balancing the need for consumer protection,” he opines.

“Nearly 15 million Indian retail investors representing 1.8% of the population have invested over $6.6 billion in crypto assets. By self- regulating and enabling KYC and AML policy, members of crypto exchanges in India have been playing a critical role, in the absence of regulations in India,” Ahuja says in defence of the industry.

While concerns related to money laundering, terror financing and other potential misuse have been raised, Ajay Pandey, senior faculty, finance and accounting at the Indian Institute of Management – Ahmedabad believes the real concern is if India can afford to remain isolated from the rest of the world.

“What are the other countries doing, what is the impact? And then we have to accordingly recalibrate ourselves. You can't really take an ideological position. It’s like saying ban gold…,” Prof Pandey quips.