Regulating Cryptocurrency Might Help India Become a USD 5 Trillion Economy
Since the Covid-19 pandemic has derailed growth in all emerging economies, it may take few more years for India to achieve its envisaged vision.
CryptoTech industry is emerging as one of the fastest-growing technology subsector in India.
Investment in Cryptocurrency is driven by the desire for a reliable, long-term store of value.
The mathematical algorithms make Cryptocurrency, by nature, one of the most secure currency around.
The acceptance of Cryptocurrency as a medium of payment by Indian corporate, like Microsoft, Wikipedia, AT&T – will further boost the growth of CryptoTech industry in India.
The Hon’ble Prime Minister of India, Shri Narendra Modi in 2019 envisioned making India a USD 5 trillion economy and a global economic powerhouse by 2024-25.
This would have made India the third largest economy in the world.
Since the Covid-19 pandemic has derailed growth in all emerging economies, it may take few more years for India to achieve its envisaged vision.
Due to pandemic, the aggregate consumption demand for goods and services, which is dependent on the income and purchasing power of people, has come down drastically.
This has also resulted in growth in unemployment and underemployment, the prominent contributors in GDP growth.
There is certainly a dire need to develop new sectors for employment generation and the CryptoTech sector in one of those emerging sectors that has potential to support that much needed growth in Indian economy.
In simple words – Cryptocurrency is a form of payment that can be exchanged online for purchase of goods and services.
The Cryptocurrency is accepted as one of the most secured currency as it uses Blockchain technology, which is a decentralized record-keeping technology and spread across many computers.
The sector that is engaged in the mining of Cryptocurrency is addressed as the CryptoTech Sector.
According to the reports, with more than 60 per cent of the States in India emerging as CryptoTech adopters and over 15 million retail investors, the industry is also increasingly attracting new start-ups.
Over 230 start-ups are already operating in India in the CryptoTech space, adding that the rising investments from institutional and retail investors has heightened awareness of the benefits of CryptoTech in the country.
While at a nascent stage, the industry is already picking up and creating employment opportunities across trading, software development, analytics, and other practices.
The reports also suggest that the market of Cryptocurrency in India is expected to grow 2X faster and has the potential to create eight-lakh+ jobs by 2030.
It can create an economic value addition of $184 billion in the form of investments and cost savings.
The NASSCOM has recently said that the Indian Cryptocurrency market has been growing exponentially over the last few years and is expected to reach up to $241 million by 2030 in India and $2.3 billion by 2026 globally.
A recent study on “Crypto Industry in India” by the NASSCOM and industry partner WazirX also said that the Indian investors have shown keen interest towards adopting Cryptocurrencies such as Bitcoin, Ethereum, and Polygon to make investments that promise them viable returns.
“CryptoTech industry in India has not only demonstrated a positive impact at the grassroots levels but is emerging as one of the fastest-growing technology sub-sector.
India provides the most unique ecosystem to CryptoTech to play a transformative role in strengthening key priority areas such as healthcare, safety, digital identification and trade and finance,” the NASSCOM President has said recently.
The former RBI Governor Raghuram Rajan, while addressing Reuters Markets Forum recently, had also endorsed the potential in Cryptocurrencies even though it has fluctuating values.
The Cryptocurrency might find a way to become an effective means of payment, he had added.
The Government’s position has consistently been that of regulatory body – which means that only such digital currency in India would be recognised as is issued and regulated by the sovereign.
Thus, Central Bank Digital Currency (CBDC) is intended to be a form of digital currency issued by the RBI and approved by the Central government as legal tender.
The RBI made its stance clear on Cryptocurrencies, saying it has major concerns around such assets, reiterating its long-standing position on the use of virtual currencies.
The RBI had also conveyed its position and concerns on such assets to the central government.
However, the Hon’ble Supreme Court in its judgment on Internet and Mobile Association of India vs. RBI in March 2021 overturned the RBI’s 2018 circular.
The Hon’ble Supreme Court noted that in the absence of any legislative ban on the buying or selling of Cryptocurrencies, the RBI cannot impose disproportionate restrictions on trading in these currencies.
Even though India is yet to formulate regulations for investing in Cryptocurrency, there was almost a 20,000% increase (from $200 million to $40 billion) in crypto investments in India in the past one years.
Low internet costs, rising real estate prices, and increased taxation on metals like Gold and Silver also seemed to have contributed to the paradigm shift of investing in tangible assets.
Moreover, the introduction of Cryptocurrency brought an unprecedented degree of opportunities for people as young as 18 years of age to invest and grow their portfolios.
Several reports have also indicated that Bitcoin, Smart Contracts, Decentralised Finance, The Wave of Tokenisation, Non-Fungible Tokens, Rise of CryptoTech Capital and Central Bank Digital Currencies would be seen as prominent seven key trends driving the growth and adoption of CryptoTech and thus strengthening the acceptance of Cryptocurrency in India.
The high inflation rates in India along with the restrictive and non-streamlined modes of investment presented a golden opportunity for visionary entrepreneurs to set up Cryptocurrency Exchanges in India.
The role of Cryptocurrency Exchange is very meaningful and is expected to help devising the Government’s involvement in the eco system, thereby helping in assessing the potential contribution in the growth of Indian economy.
The transactions in stock-in-trade transferred in exchange for real currency will further ease up the regulatory measures.
Having said this, one cannot rule out the concerns of the Indian Government.
Unless the Cryptocurrency gets Government’s regulatory nod, investments by small-investors might not see that steady rise.
From the Government point of view, since Cryptocurrency is digitally created and there is no regulation attached with it, taxing the income received during the transactions is becoming nearly impossible.
Some experts believe that amendment in Section 55 of the Income Tax Act 1961 might help.
Taxing the additional income generated in the transaction, percentage of Government’s share as GST in transactions, and imposing the system of taxing the dividend could be few measures Government might like to consider.
Sooner than later, the Government would need to find a win-win situation as delay in regulating Cryptocurrency is not only depriving government from its due in transactions but also depriving the Indian economy of its addition in the GDP.
When India is thriving to become a USD 5 trillion economy in next five years, it may not be wrong to say that with regularization of Cryptocurrency and Crypto Exchanges, the highway is all set to become smoother and faster.
Pavan Kaushik
Author and Storyteller
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