How cryptocurrencies can accelerate wealth creation in India

In August 2021, India ranked second among 20 countries that showed the highest cryptocurrency adoption in the world, according to the 2021 Global Crypto Adoption Index published by global blockchain data platform Chainalysis.

The same month, US-based research platform Finder released a report indicating that India was among the top five countries with the highest crypto adoption globally. About 30 percent of those surveyed in India stated that they owned cryptocurrencies.

As of October 2021, India has the highest number of crypto owners in the world, at 10.07 crore, according to a new report by BrokerChooser, a broker discovery and comparison platform.

The signs are telling – India is on the verge of a cryptocurrency explosion. It comes at a time when cryptocurrency adoption is soaring worldwide. Global adoption increased by over 880 percent from July 2020 to June 2021.

India is a global tech leader with one of the world's youngest populations while also being home to a large unbanked segment. These factors make it a potential hotbed for cryptocurrency adoption and wealth creation.

Decrypting cryptocurrency

Although interest in cryptocurrencies is growing around the world, they are yet to reach mainstream adoption in India. The term cryptocurrency is often used synonymously and erroneously with Bitcoin.

Bitcoin may have been the world’s first operational cryptocurrency, but today it is among 6,500 cryptocurrencies available globally, including others like Ether (ETH), Litecoin (LTC), and Tether (USDT).

The list of cryptocurrencies is growing. Each is dictated by its own protocol and goals. For instance, Bitcoin (BTC) was developed as an alternative to fiat currencies and sought to operate as a medium of exchange. But Ether was created to facilitate and monetise the Ethereum blockchain platform.

Developers can build applications and protocols on top of Ethereum to innovate in the areas of payment, financial services, lending, and borrowing. Stablecoins are another interesting type of cryptocurrencies backed by exchange-traded commodities, fiat currencies, or other cryptocurrencies to achieve greater stability.

Cryptocurrencies offer several advantages. They enable quick and frictionless payments, they are transparent and offer greater traceability, which makes it easier to manage risks and allow law enforcement to tackle illicit activity more efficiently.

Further, the blockchain technology that enables cryptocurrencies is also used to create and automate products and services that are set to transform how we think of finance. It would be no exaggeration to suggest that cryptocurrencies and blockchain are the biggest disruptions since the Internet.

ALSO READ

What is cryptocurrency? The basics and value of crypto explained in simple terms

Seizing the moment

India has one of the youngest populations globally. The average age of Indians is 29 years, and India is home to a fifth of the world’s youth demographic. The bulk of its citizens are digitally native. At the same time, over 190 million adults in the country remain unbanked.

These factors make it an interesting case for digital asset adoption. India has already cemented its place as one of the world’s leading technology hubs. Now, it is poised to emerge as a leader in finance. By leveraging the potential of cryptocurrency, it has an opportunity to enhance financial equality and wealth generation.

Currently, India is in a ‘crypto curious’ stage. The adoption of cryptocurrency has escalated by millions, but it is yet to go mainstream. The government, too, initially took a cautionary approach. Between 2013 and 2017, the Reserve Bank of India (RBI) and the Ministry of Finance expressed concerns about unregulated digital currencies. Subsequently, the RBI issued a ban on cryptocurrencies in April 2018, which resulted in a 99 percent fall in trading volumes.

In March 2020, the Supreme Court overruled the ban, clarifying that digital currencies were not illegal, thereby resuscitating the cryptocurrency industry. A surge in investments followed. The government is currently working on a bill to determine the future of cryptocurrencies in India.

The regulation of digital assets is evolving globally. Technology is kind to early adopters. History shows that regulations in favour of promising technologies offer a first-mover advantage.

Take the example of the Internet in the United States. The Telecommunications Act of 1996, introduced by the Clinton administration included the Internet in the broadcasting and spectrum allotment for the first time.

The act ensured the Internet would not be regulated by the same utility-style rules that were originally implemented to regulate the telephone system in the 1930s. In a revolutionary move, it allowed anyone to enter the communications business and compete in the market.

Consequently, the United States became an Internet powerhouse, paving the way for global tech giants like Google and Facebook. By 2018, the Internet had become the fourth largest sector in the US, generating more than two trillion dollars in GDP and six million director jobs.

Today, India is in a similar position with cryptocurrencies. Indians are eager to test the potential of this new asset class. The right regulatory framework can enable India to enhance wealth creation, bridge economic gaps, and become a leading hub for cryptocurrency innovation.

Further, as global cryptocurrency businesses make inroads into the Indian market, the Indian government can leverage its expertise to implement regulations that draw on the best practices worldwide.

There is no better time than the present to invest in cryptocurrencies, given their immense possibilities for the future. Bitcoin, for example, has the potential to become a major global currency. Other platforms such as Ethereum provide investors exposure to advances in blockchain technology.

In this sense, cryptocurrencies differ from traditional assets like gold or stocks. They enable opportunities for wealth creation while simultaneously providing access to pathbreaking innovation.