Swati Daga first bought bitcoin in 2017, when the cryptocurrency was trading well below $3,000. Her decision to invest in digital currencies was greeted with caution by her family, she recalls. “The elders in my family told me not to throw my money away,” said Daga, who runs a food business near New Delhi.
But the 33-year-old has not regretted her decision – the value of bitcoin has increased 15-fold since then – and she continues to invest up to 10% of her savings in cryptocurrencies, including bitcoin and ethereum. “I find the stock markets borings,” she told CNN Business, adding that she likes the “excitement” and “recklessness” that come with investing in volatile currencies.
She is not the only one. India has seen a huge boom in cryptocurrency trading since the start of the pandemic, although officials in Asia’s third-largest economy have for years expressed concerns about digital currencies and even flirted with banning them. Industry entrepreneurs told CNN Business that the country has the potential to become a cryptographic superpower, as it is one of the hottest internet markets in the world, with 750 million users and hundreds of millions more to go online for the first time.
India ranked second only to Vietnam last year in a list of countries that have seen the fastest growth in cryptocurrency adoption, according to a report published in October by blockchain data platform Chainalysis.
While the government does not maintain estimates of how many people trade cryptocurrencies, industry experts have suggested that the country may now have more than 20 million cryptocurrency investors. The growth is driven by younger investors — mostly under 35 — and many of them come from smaller cities and towns, the founders of two of India’s biggest cryptocurrency exchanges told CNN Business.
According to Sumit Gupta, CEO and co-founder of CoinDCX exchange, many Indian millennials have started “Your Cryptocurrency Investment Journey”. While 20 years ago their parents chose to invest in gold, these young people “are more interested in having bitcoin as part of their portfolio,” Gupta told CNN Business, referring to the fact that traditionally Indians choose to park their money in gold or savings.
Buying gold is an investment and a cultural habit in India, which is one of the biggest markets for the precious metal, according to the World Gold Council. Also considered auspicious by Hindus and Jains, and plays a key role in many religious ceremonies. Mumbai-based CoinDCX became India’s first crypto unicorn last year, reaching a valuation of $1.1 billion after raising money from investors such as Coinbase Ventures and B Capital Group. The company says that 70% of its 10 million users are between 18 and 34 years old.
Data shared by rival company WazirX tells a similar story. WazirX also has over 10 million users and called 2021 a “phenomenal year” for cryptocurrency trading in India. The company was acquired by Binance, one of the largest cryptocurrency exchanges in the world, in 2019.
More than 65% of its users are under the age of 35, according to a recent report by the company, and it has seen a “700% increase in the number of participants from smaller cities like Guwahati, Karnal, Bareilly, thus signaling growing interest from rural and semi-urban.” Pritish Kumawat, a small-town cryptocurrency trader in the western state of Rajasthan, said he now finds conversations about cryptocurrencies in almost every teahouse in his area. Often the most engaged participants are college students, he said, adding that the massive rise in bitcoin last year has fueled the frenzy in India.
In November, bitcoin was trading at a record $68,990, but has since dropped to around $43,000. In addition to bitcoin, meme coins like dogecoin and shiba inu are also popular among Indians, the WazirX report added. In addition to investors from smaller cities, both companies have seen a more than 1000% increase in the number of female users on their platforms, albeit on a small basis.
Gupta said that Indian women’s crypto holdings have had “a big advantage” over the past 18 months and are “quite high, quite healthy, relative to the stock markets.” The company’s data shows that 15% of its general users are women – which is also the global trend.
Excitement about cryptocurrencies is building in India, despite the country’s intermittent relationship with digital currencies. The central bank has long expressed concerns that cryptocurrencies could be used to launder money and finance terrorism. A cryptic proposal posted on the Indian parliament’s website last year even suggested that the government was exploring plans to “ban all private cryptocurrencies in India”. This year, however, started on a more cheerful note for enthusiasts.
Earlier this month, the Indian government announced that it would impose a 30% tax on income from virtual digital assets, which many industry experts took as a sign that cryptocurrency trading will not be banned. The government also said it would release a digital rupee in the coming months. “Taxation of virtual digital assets or cryptocurrencies is a step in the right direction. Gives much-needed clarity and confidence to the industry“, Gupta said at the time of the announcement. Siddharth Menon, co-founder of WazirX, told CNN Business that after the announcement, his platform saw daily sign-ups increase by more than 50%. He also noticed a growing interest among Indian developers and other professionals in joining the cryptocurrency industry.
“I’m receiving messages from LinkedIn” from senior executives in India who are now more optimistic about the deal, he said. In the past, Indian exchanges struggled to hire and retain experienced people due to a lack of clear regulations. But the Indian government soon shook the mood, clarifying that cryptocurrencies are not yet legal in the country.
“I’m not doing anything to legalize it, ban it or not legalize it“, said Finance Minister Nirmala Sitharaman,in parliament a few days after announcing the tax rate. “To ban or not to ban will come later… But I will tax it because it is a sovereign right.”
According to Anirudh Rastogi, founder of the law firm Ikigaw Law, which works with cryptocurrencies:
“I think the government is not sure what it wants to do from a political point of view. He knows where he wants to land broadly. It wants to find the right balance where it is not disconnected from global progress in blockchain and other technologies, but it also wants to address cryptocurrency-related concerns.”
Rastogi added that the “extraordinarily high” tax on cryptocurrencies is a short-term correction, which will also act as a deterrent for many investors. “This rate is normally used to tax activities that are not considered economically productive, such as lotteries,” he said. “So this could be an indication that the government wants to generate revenue but does not see cryptocurrency trading as economically productive.”. For shares, India applies a short-term capital gains tax of 15% if the shares are sold in less than one year and 10% if sold after one year.
Gupta hopes the government will decide soon. India, with its vast pool of developers and enthusiastic young population, could be a “superpower in the next five to 10 years” in the cryptocurrency and blockchain industry, he said. What is missing now is a clear regulatory framework,” he added.
This article is a translation of the writing by Diksha Madhok to the website CNN Business.
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