Cryptocurrencies In India — What Does the Future Hold?
The future of cryptocurrencies in India has been uncertain ever since the beginning. Even though India is now one of the largest countries in terms of the number of crypto users and investors, it still seems far away from legalizing crypto trading. With the government of India hell-bent to ban most, if not all, private cryptocurrencies, the future appears in doubt. However, there is also news of RBI planning to create and launch its own public digital currency in India.
In order to properly understand the future of cryptocurrencies in India, we must take a look into the past, to know how it all began.
Cryptocurrency: History & the Past
Even though there have been multiple attempts to create digital currency or money in the past, before the 2000s, the most significant step in the favor of cryptocurrencies was the release of the Bitcoin paper in 2008 by an anonymous developer or organisation that called itself ‘Satoshi Nakamoto’. At the time, the paper created a mass disruption in the industry, as it regarded Bitcoin as a peer to peer electronic cash system or a digital payment system that could effectively solve many problems of the traditional, centralized financial system.
Nevertheless, it was not until 2010 when the actual real-life use of Bitcoin was first observed. It was when a user exchanged 10,000 bitcoins for two pizzas. Yes, that’s correct. At the time, the value of one bitcoin was not more than a couple of US pennies. However, this showed the world that it was possible to buy things using Bitcoin (cryptocurrencies).
After that, other cryptocurrencies inspired by Bitcoin started emerging. The most notable of these was Litecoin, which is now one of the top cryptocurrencies by market cap.
Between 2012 and 2017, Bitcoin and the crypto market as a whole gained immense popularity. The price of BTC increased by almost 200 times during this period. A new cryptocurrency called Ether (Ethereum) was also launched in between that changed the way people looked at digital currencies. ETH was the currency that shifted the user perspective of cryptocurrencies from digital payments to much more.
This was also the period when India first started witnessing the crypto movement. During the period, multiple exchanges namely Zebpay, Coinsecure, Unocoin, etc. started offering their crypto trading services to Indian users.
In December 2013, the Reserve Bank of India (RBI) released a statement saying that cryptocurrencies are not backed by the central bank and their value is not supported by an asset.
In another press release in February 2017, RBI regarded the 2017 crypto boom as an unintended consequence of 2016’s demonetisation.
In Oct-Nov 2017, the government in response to multiple PILs filed in the Supreme Court for clarification regarding cryptocurrencies in India formed a committee to study virtual currencies to figure out possible actions.
In April 2018, RBI abruptly decided to put an alleged ban on crypto trading in India by preventing banks and financial institutions from dealing in virtual currencies and/or providing services to entities that deal in cryptocurrencies. This was a major blow on India crypto traders and exchanges, as many digital currencies lost over 50% of their values overnight, trading activities dropped, volumes fell and a lot of people lost their jobs.
In March 2020, in response to a writ petition filed by multiple exchanges, the Supreme Court decided to lift the so-called crypto ban that was imposed by RBI in 2018. This was all the hope the industry needed. The crypto market and investors came back to life. Between April 2020 and February 2021, the price of Bitcoin jumped by over 700%, mostly thanks to the government’s positive outlook on virtual currencies.
In the latest news, the government announced that it is working on creating a sovereign digital currency of the state and will eventually ban all private cryptocurrencies in India. However, the same statement also mentioned that there could be some exceptions, and bitcoin is likely to be one.
What does the future hold for cryptocurrencies in India?
India’s crypto market is one of the largest in the world. It not only allows millions of investors to trade the global digital currencies, but also provides jobs to thousands of people country-wide. Even the government understands this, which is why it’s unlikely that they will outright ban all cryptocurrencies and/or exchanges from the country.
The most viable solution would be to come up with a way such that the focus is shifted from cryptocurrency trading to utilising the blockchain technology for innovation and to create solutions to a variety of problems in sectors like governance, security, data, payments, energy, and more.
Also, it is possible that futuristic blockchain projects that focus primarily on the applications of the blockchain instead of digital currencies may see a rise.
Projects such as the Libra Ecosystem have the potential to change the crypto paradigm in India.
