SUMMARY
The Government Of India Is Looking To Legalise Cryptocurrency Such As Bitcoin
There is a growing consensus that cryptocurrencies will certainly play a crucial role in the way we deal with money. In April 2017, the total market cap for all cryptocurrencies, combined, was slightly higher than $25 Bn. The same market cap shot up by 300% and touched $100 Bn within 60 days. It is already widely reported that cryptocurrency, as an asset class, is set to outpace all other asset classes in relative growth.
Cryptocurrency: An Instant Global Phenomenon:
Despite tremendous progress in economic globalsation, the global financial system is still very fragmented, with only a few players having an invitation to sit at the table with the big boys. Blockchain technology has tremendous potential to consolidate and, perhaps, even standardise financial markets all over the world.
More than 3 Mn people (three times previous estimates) are estimated to be actively using cryptocurrencies like Bitcoin, finds the first global cryptocurrency benchmarking study by the Cambridge Centre for Alternative Finance. Cryptocurrencies have enjoyed a tremendous growth in the global markets, with Bitcoin and Ethereum leading the pack. Bitcoin is, by far, the most famous of these cryptocurrencies. It is also among the oldest, having first emerged in 2009. The top five biggest currencies—Ethereum, Ripple, Litecoin, Dash, and Monero—now account for 20 percent of the market.
Potential geographic markets in which cryptocurrencies can be leveraged include countries with less developed financial infrastructure (fewer brick and mortar banks), but high smartphone usage.
For example, in Kenya, over half of the national GDP is operated by a digital currency (Magee, 2015). The conventional wisdom has been that the number of people using bitcoin and other cryptocurrencies was around 1 Mn people. However, based on newly collected data by The Cambridge Centre of Alternative Finance (CCAF), including the percentage of the estimated 35 million cryptocurrency “wallets” (software applications that store cryptocurrencies) that are in active use, the CCAF research team estimates that there at least 3 million people actively using cryptocurrency today.
Higher Visibility And Adoption
Countries like Japan recently recognised Bitcoin as a legal method of payment. Although they treat it as an asset and not as a currency, Japan has seen huge surge in Bitcoin demand. In Estonia, government is implementing blockchain technology for healthcare, banking services and even governance by allowing its citizens to become ‘e-Residents’.
Countries like the US, UK, Denmark, Sweden, South Korea, Netherlands, Finland, Canada and Australia have been supportive of Bitcoin and cryptocurrency. Billionaire Mike Novogratz recently revealed that he holds more than 10% of his net worth in cryptocurrencies like Bitcoin and Ethereum.
The State Of Cryptocurrency In India
India was a late entrant to crypto adoption. Due to restrictions in foreign currency remittances and allowable overseas investments, Indians often does not get to trade in international financial instruments. During the time when bitcoin was picking up pace in China, Indians struggled to transfer money to the overseas Bitcoin exchanges and thereby missed the Bull Run.
However, things changed drastically after the demonetisation drive announced by PM Narendra Modi. This action was meant to curtail counterfeit cash, but it also left many people panicking. In the panic, Indian residents turned to Bitcoin. Google recently reported that searches from India about Bitcoin have reached all-time highs, and the value has too.
Once the local exchanges started functioning in India, the Bitcoin users got a feasible option to purchase Bitcoin using local currency and the adoption of Bitcoin started increasing considerably. Owing to the shortage of Bitcoin sellers in India, the Indian Bitcoin price often ran at a premium of over $400 from the international market price.
India seems to be next in line to legalising Bitcoin, now that the government has agreed to regulate Bitcoin. The Indian government has agreed that regulating Bitcoin could be beneficial and is currently creating the laws to do so. The Reserve Bank of India is also considering using the blockchain technology in banking. In India, the Department of Economic Affairs, Ministry of Finance has constituted an inter-disciplinary committee to examine the existing framework around Cryptocurrencies and submit a report by July. The committee will not only examine the present scenario of crypto currencies in India and around the globe, but will also suggest measures and means to deal with consumer protection, education and money laundering.
As predominant market participants in India are buyers, India exchanges struggled to provide a liquid order book to the buyers. In spite of these shortcomings, the crypto users in India kept increasing at a healthy pace. The regulated financial market participants like stock and commodity brokers, who enjoys major market share of the investing community, are not yet part of this ecosystem.
Once favourable regulatory guidelines are framed for cryptocurrency trading and investment, the growth of cryptocurrency in India will be exponential and at some point in time might take up a considerable global market share. The superlative performance of altcoins and ICO token performances have made the Indian investors to look beyond Bitcoin investments. Even though none of the major Indian exchanges are offering other cryptocurrencies and digital assets, Indians investors have started purchasing altcoins and ICO tokens from international exchanges. This trend is going to continue and if the Indian regulators provide favourable guidelines for cryptocurrency investments and trading, India stands to become one of the fastest growing regions for cryptocurrencies.
