Understand the current state of crypto assets in India
It’s a sweeping wave to some and an enigma to others, but crypto is the new buzzword in the world of investment finance. Crypto is part of the Web 3.0 internet landscape that decentralizes ownership and changes the concept of one or more large entities in control of everyday life.
It’s a sweeping wave to some and an enigma to others, but crypto is the new buzzword in the world of investment finance. Crypto is part of the Web 3.0 internet landscape that decentralizes ownership and changes the concept of one or more large entities in control of everyday life.
Crypto has been on the radar of Indian investors recently. It is estimated that India has 25 to 30 million investors with exposure to this asset class. This is set to grow manifold over the next 3-5 years. But how does India and its government officially treat its status? We identify key trends around this and address the challenges the industry is facing.
Crypto has been on the radar of Indian investors recently. It is estimated that India has 25 to 30 million investors with exposure to this asset class. This is set to grow manifold over the next 3-5 years. But how does India and its government officially treat its status? We identify key trends around this and address the challenges the industry is facing.
The last 3 years: From the sidelines to the mainstream
Crypto, like many emerging technologies, was on the sidelines in India until 2020. Indians could feel a reluctance to explore the sector themselves. But with increased use worldwide and in India, the government’s stance on virtual digital assets (VDA), as they are called, has undergone a significant transformation.
The last 3 years: From the sidelines to the mainstream
Crypto, like many emerging technologies, was on the sidelines in India until 2020. Indians could feel a reluctance to explore the sector themselves. But with increased use worldwide and in India, the government’s stance on virtual digital assets (VDA), as they are called, has undergone a significant transformation.
Now the government has stated that it is taking a “studied approach” to VDAs and is trying to determine its utility or necessity or both. Recognition with a major legal mandate in the form of direct tax of 30% and a TDS of 1% followed in 2022. India notably collected INR 157.9 crore in the last year via this initiative.
Now the government has stated that it is taking a “studied approach” to VDAs and is trying to determine its utility or necessity or both. Recognition with a major legal mandate in the form of direct tax of 30% and a TDS of 1% followed in 2022. India notably collected INR 157.9 crore in the last year via this initiative.
This could have been much higher if not for traders using global exchanges that do not follow Indian laws. This issue has also been addressed recently. Earlier this month, the Union government brought crypto under the Prevention of Money Laundering Act (PMLA) which puts the onus on users to declare transactions and TDS. It also made it mandatory for crypto entities to adopt KYC and enhanced due diligence (EDD) procedures, just like banks and major financial institutions. Crypto exchanges are also made as reporting entities where they will red flag suspicious transactions to the authorities. This has unified the local crypto ecosystem and has enabled platforms to follow consistent processes and services to their users.
This could have been much higher if not for traders using global exchanges that do not follow Indian laws. This issue has also been addressed recently. Earlier this month, the Union government brought crypto under the Prevention of Money Laundering Act (PMLA) which puts the onus on users to declare transactions and TDS. It also made it mandatory for crypto entities to adopt KYC and enhanced due diligence (EDD) procedures, just like banks and major financial institutions. Crypto exchanges are also made as reporting entities where they will red flag suspicious transactions to the authorities. This has unified the local crypto ecosystem and has enabled platforms to follow consistent processes and services to their users.
On the whole, the government seems to be accepting crypto and the underlying blockchain technology rather than dismissing them as “risky” or even “banning” them.
On the whole, the government seems to be accepting crypto and the underlying blockchain technology rather than dismissing them as “risky” or even “banning” them.
Banking is still not a piece of cake given RBI’s concerns
RBI continues to be dubious about the ‘underlying value’ of crypto assets. Despite launching a Central Bank Digital Currency (CBDC) pilot late last year, the RBI has not adequately supported the crypto ecosystem to date.
Banking is still not a piece of cake given RBI’s concerns
RBI continues to be dubious about the ‘underlying value’ of crypto assets. Despite launching a Central Bank Digital Currency (CBDC) pilot late last year, the RBI has not adequately supported the crypto ecosystem to date.
Banks are still not coming up with partnerships with exchanges to help convert INR to crypto. NPCI even blocked UPI from being used for this purpose. However, we expect this to change in the coming year as the Union Government continues to strengthen its initiative to provide a safety net to crypto investors.
Banks are still not coming up with partnerships with exchanges to help convert INR to crypto. NPCI even blocked UPI from being used for this purpose. However, we expect this to change in the coming year as the Union Government continues to strengthen its initiative to provide a safety net to crypto investors.
CBDCs and crypto are conceptually aligned on certain points. Both CBDC and crypto are “secure stores of value” and users can store both in digital wallets. In fact, the introduction of RBI’s CBDC (eRupee) is expected to give an impetus to the use of crypto assets as well if it is recognized as a safe on-ramp for INR to crypto transactions.
CBDCs and crypto are conceptually aligned on certain points. Both CBDC and crypto are “secure stores of value” and users can store both in digital wallets. In fact, the introduction of RBI’s CBDC (eRupee) is expected to give an impetus to the use of crypto assets as well if it is recognized as a safe on-ramp for INR to crypto transactions.
From the government’s perspective, digital transactions can now be easily monitored and money laundering operations stopped. eRupee can be incorporated into decentralized applications with the development of blockchain technology, thus making it an important part of the Web 3.0 ecosystem.
From the government’s perspective, digital transactions can now be easily monitored and money laundering operations stopped. eRupee can be incorporated into decentralized applications with the development of blockchain technology, thus making it an important part of the Web 3.0 ecosystem.
Education and awareness: the key challenge in crypto adoption
The foremost challenge in India’s crypto adoption is the awareness of its complexity and its associated volatility. Indian users understand that this is an asset class that can provide disproportionate returns, but they often fail to manage the risks involved.
Education and awareness: the key challenge in crypto adoption
The foremost challenge in India’s crypto adoption is the awareness of its complexity and its associated volatility. Indian users understand that this is an asset class that can provide disproportionate returns, but they often fail to manage the risks involved.
Over-leveraging, investing in fraudulent projects, falling into fraud, etc. are some issues that the masses need to be taught about. There is a latent need for top-down programs that address vernacular awareness now. That said, the services offered by crypto platforms are at par with global peers while the customer support ecosystem in different languages is being strengthened.
Over-leveraging, investing in fraudulent projects, falling into fraud, etc. are some issues that the masses need to be taught about. There is a latent need for top-down programs that address vernacular awareness now. That said, the services offered by crypto platforms are at par with global peers while the customer support ecosystem in different languages is being strengthened.
The volatility of cryptoassets is another key issue. We spread an investor mentality (investing over several years) instead of a trader mindset (seeking short-term gains) to succeed in crypto.
The volatility of cryptoassets is another key issue. We spread an investor mentality (investing over several years) instead of a trader mindset (seeking short-term gains) to succeed in crypto.
We believe in a bright future
Crypto and blockchain technology has the potential to bring about a change across industries for the benefit of the masses. As the government and the crypto sector work together, the challenges of greater adoption, regulation and awareness will hopefully be resolved soon.
We believe in a bright future
Crypto and blockchain technology has the potential to bring about a change across industries for the benefit of the masses. As the government and the crypto sector work together, the challenges of greater adoption, regulation and awareness will hopefully be resolved soon.
Author: Vikram Subburaj, CEO, Giottus Crypto Platform
Author: Vikram Subburaj, CEO, Giottus Crypto Platform
