Cryptocurrency finance has been widely adopted in developed countries, with strong support in the United States and Japan. According to the Chainalysis 2022 Global Crypto Adoption report, Vietnam ranks first in cryptocurrency adoption with an index ranking of 1.000, followed by India in fourth place with an index score of 0.663.
The future of crypto finance in India is a topic fraught with promises and pitfalls. With the Indian government steadily working towards the development of crypto finance, there has never been a better time for crypto enthusiasts to explore the space. The regulatory framework and investor perception towards cryptocurrencies is evolving day by day, with many viewing it as a new digital mode of payment and investment asset class.
The Indian crypto market is very active and is slowly but surely gaining traction. According to a Nasscom report, the market size is expected to exceed $241 million by 2030, with over 15 million retail investors and over 60% of Indian states adopting crypto.
Additionally, peer-to-peer (P2P) platforms have helped cryptocurrency become more widely adopted among the tech-savvy generation. For example, P2P platforms like Paxful allow cryptocurrency to be exchanged directly between two individuals without the need for an intermediary.
With a strong institutional presence and around 230 startups in the industry, there is great potential for expansion. The Indian cryptocurrency market is expected to grow twice as fast by 2030, creating over 800,000 job opportunities.
Increase investor awareness
Crypto finance is a niche industry and investors need to be educated about the returns, risks and taxation. The government's announcement of a 30% tax on profits from digital assets and an additional 1% withholding tax on transactions above Rs 10,000 has left crypto investors confused and unsure of how to proceed.
Such developments have left Indian investors seeking a way to quickly and consistently assess their taxes. This is where automated cryptocurrency taxation platforms come into play. Such platforms allow cryptocurrency investors to automate their taxation by consolidating their portfolios and transactions on a unified platform with a unified dashboard. These platforms are integrated with various cryptocurrency exchanges and automate the calculation of tax impact for cryptocurrency users.
Currently, 66% of crypto investors are under 35 years old (according to a recent report by an Indian cryptocurrency exchange), indicating the popularity of cryptocurrencies among the country's youth. In the near future, increased regulation, education and awareness will help reduce skepticism towards cryptocurrencies and attract more millennials and experienced investors to the community.
Role in the spread of digital currencies
The Indian government and the Reserve Bank of India (RBI) have taken a conscious and decisive approach towards regulating cryptocurrencies in the country. The RBI has proposed a centrally regulated digital currency, i.e. a CBDC (Central Bank Digital Currency) that would function as a fiat digital currency. The digital fiat currency would be transacted on the blockchain using wallets, just like any other decentralized cryptocurrency.
This newly proposed framework has the potential to streamline and regulate cross-border payments, with the primary objective of acting as a viable digital payment alternative for Indian retailers and wholesalers, reducing dependency on cash, lowering transaction costs and settlement risks.
The future is bright
RBI has taken the risks associated with cryptocurrencies seriously and recommended caution before investing. At the same time, the government recognises the potential benefits of a digital rupee in facilitating digital payments across the country and saving on the costs involved in printing, storing and distributing traditional currency. We are hopeful that a gradual and steady move by the government towards accepting digital assets will pave the way for a more evolved and thriving cryptocurrency community in India. With technological advancements and an aware approach from the government, cryptocurrencies promise a solid path forward in India's financial future.