By the end of 2020, global e-commerce was growing at 19 per cent CAGR (2017–23) to reach $6.5 trillion. Digital/mobile wallets were fast becoming preferred modes for e-commerce payments, and were projected to corner 52 per cent market share by 2023.
Against this backdrop, blockchain technology and crypto assets started gaining prominence again. As the US-China trade war accelerated in 2019, governments across the world started exploring the possibility of digital currencies, in response to the growing political and economic instability caused by a fluctuating US dollar and its impact on international trade. The younger generation found the world of financial technologies more enticing and promising, as the blockchain technology offered safety and security of data.
Certain cryptocurrencies/tokens such as Bitcoin, Ethereum and few others began to provide different kinds of value proposition as an investment in an asset that was delivering more returns. While most welcomed the underlying technology blockchain as revolutionary, crypto was criticised heavily due to rising cases of money laundering, illegal trade and fraudulent activities.
Interestingly, though this may be possible in the case of crypto, it’s not the technology that failed us, but the people who fail the system. In the case of crypto too, most of the reported cases of hacks, or frauds have been instances where people jumped into cryptocurrency without doing due diligence and the perpetrators who took advantage of the situation. That makes it necessary for the regulators to step in and handle the issue at hand by not banning the technology, rather embracing it and allowing it to develop organically within a legal framework.
This will not only help countries earn revenue while investing in future technology, but lead to the creation of a digital currency ecosystem. As countries around the world continue to discuss regulations around cryptocurrencies, the industry itself seems to be on an upward trajectory.
Economists, industry players and investors around the world continue to raise concerns over the risks associated with entering the ecosystem and strongly advise investors to perform due diligence and research before jumping the bandwagon.
Elon Musk, while investing in Bitcoin, has warned people to not invest their life savings into crypto. A good investor who understands the functioning of the crypto ecosystem will always advise to invest only around 1-5 per cent of their disposable income in it.
US Treasury Secretary Janet Yellen while expressing concerns over cryptocurrencies, said innovation could help address the challenges around it, and the technology can actually be used to plug digital gaps. Even while some lawmakers remain wary, the industry has more and more investors and corporations jumping onto the bandwagon.
To put things into perspective, the global crypto market with 8,000+ different cryptocurrencies operating is today valued at over $1.4 trillion, of which Bitcoin (BTC) alone is worth over $ 1 trillion. In India, the current volume of crypto transactions in India is around $7.5 million a day compared with $1.5 billion a day in the U. Since the reversal of the ban on trading cryptocurrencies, Indian exchanges have witnessed about 500per cent growth in business. With Bitcoin crossing the $55,000 mark, experts today feel cryptocurrency has emerged as one of the most valued asset classes in the current scenario.
India should capitalise on the potential and instead of banning it try to embrace it within its legal framework in order to try and create its own indigenous model by allowing some of the better open-source cryptocurrencies to function as an asset class.
Most of the operators of the crypto exchanges or institutions in India are run and owned by Indians. These teams and players from India over the years have been careful and cautious in their approach and steered clear of treating it as a currency, and instead focus on it as an asset class. Working within a realm of uncertainty prevailing about the legality of its very existence, the market players have been cautious and worked on building safe and secure infrastructure based on the blockchain technology.
All the key players today practise the highest level of KYC and AML-monitoring processes. The skilled workforce operating in these industries are handpicked from the best of institutes and bring in innovative products to ensure that even if cryptocurrency may be a global offering in the DeFi world, its functioning and operations are done within India, with products developed by Indians operating within the framework of what is expected of any financial institution in India by the law of the land.
Should a ban come on cryptocurrencies, it may be a sign of India missing the global fintech development bus, at a time when the nation stands on the thresholds of doing even better. The government’s concerns are genuine and well-founded. Every player in the industry will univocally admit to the merits of it.
Hence most of them are looking forward to the Government of India with a hope that with dialogue, guidance and participation, India can actually turn the entire game to its advantage. Countries such as the US, Germany, Singapore and Japan, have adopted favourable policies to enable the growth of the cryptocurrency industry. While Japan was the early starter, the US too slowly and steadily changed its stance and cautiously inched towards adopting it.
Singapore, which has on many occasions worked in tandem with the Indian government, has provided interesting case studies that can tried and adapted on Indian soil. One of the best examples being GST implementation.
Though the industry remains uncertain about how the official digital currency will pan out, it remains optimistic that a dialogue with the government on technology and digitisation can put things in perspective and they will be able to see the merit of letting open source and established cryptocurrencies operate in India as an asset calls regulated by and transparent to agencies that need to be on top of such affairs.
While the Indian crypto industry is trying to proactively engage with the government and is willing to be regulated and taxed, Indian investors too are turning bullish on the potential of this sector. And why not?
In the last few weeks, we have noticed credible and significant institutions like Tesla, MasterCard, Paypal and Microstrategy adopting cryptocurrencies into their ecosystem. Besides, companies such as Google Pay and Samsung Pay are now contemplating making inroads into cryptocurrency via Bitpay. Analysts from financial institutions such as JP Morgan have observed that gold ETF investors are now looking at bitcoin as an alternative to gold.
Simultaneously, more and more governments globally are working towards developing their digital currency or Central Bank Digital Currency (CBDC), while creating an ecosystem to enable a digital economy. All these developments are happening at an unprecedented pace, and the time is not too far when digital currencies would be ushered in as part of the mainstream economy.
In hindsight, it took 70 years for the country to reach $3 trillion GDP mark. Bitcoin, on the other hand, conceived in 2009, is already a $1 trillion industry in just 10 years. This speaks volumes of its potential and the crucial role it can play in achieving the Indian government’s $5 trillion economy target by 2025.
The bill on cryptocurrency has not yet been presented, and its content nature is still unknown. Yet, the crypto community remains focused on its commitment to work with the authorities and government officials in order to find a way where the merits can be evaluated by competent authorities. The only hope is that the government will give an opportunity to the technology to prove its merit while operating under the watchful eyes of the legal entity.
Every form of investment has risks attached to it, just as in the case of stocks or mutual funds. However, what is important is the need to educate and create awareness to address those issues and plug the gaps. The blockchain and crypto industry has increasingly been working towards educating and sharing knowledge. The caution level with regard to investment in the sector is as stringent as those being followed by, say, the insurance industry.
Globally, cryptocurrencies, such as Bitcoin and Ethereum, owing to their public nature, are already considered public currencies. Regulation and adoption of cryptocurrencies as part of the economy is inevitable for global economies. India hasn’t missed the bus; rather, the bus is waiting for India to hop on to chart the course of an exciting future for a digitalised financial system.
(Sumit Gupta is CEO & Co–founder of CoinDCX. Views are his own)