By Amanjot Malhotra
The crypto industry has grown over the past decade from a small community of developers to a trillion-dollar global economy encapsulating sophisticated technology, various use cases, and millions of users. This remarkable growth has yielded significant opportunities ranging from infrastructure security to entirely new economies like Metaverse, NFTs, and DAOs.
Cryptocurrency has the capacity to alter the current financial ecosystem’s established patterns. A few challenges still exist because the technology is still in its infancy. Governments around the globe have expressed their concerns regarding the use of these digital assets, which can be partially explained by fear and partially by a lack of stability.
Landscape across the world
The world’s opinions on cryptocurrencies are sharply divided, with one group passionately in favor of their growth and continued technological advancement and the other group apprehensive of their decentralized character.
El Salvador is the first and only nation so far to formally recognize Bitcoin as a form of legal tender on June 9, 2021. Others worry that it will be used to finance illegal activities like drug trafficking, money laundering, and terrorism while seeing it as a threat to their current monetary systems. The usage of cryptocurrency is prohibited in several nations, like China, Egypt, Qatar, and Vietnam.
Earlier this month, the USA, whose judgment on this topic could influence those of other nations, unveiled a plan to establish new regulations for cryptocurrencies.
The majority of crypto assets will be seen as commodities rather than securities, and the CFTC (Commodity Futures Trading Commission) would be in charge of enforcing the regulations, which was the bill’s main draw.
The new measure would also mandate that stablecoin issuers keep high-quality liquid assets in an amount equivalent to the value of all issued stablecoins and publicly disclose their holdings.
In light of the general pessimism regarding cryptocurrencies, these are progressive moves as the governments are now recognizing the opportunities and improvements they might bring, remittances being a perfect example.
Current Situation in India
Despite the ambiguity surrounding cryptocurrencies in India, the nation attracted investments in blockchain and cryptocurrencies totaling $638 million over 48 fundraising rounds in 2021, according to Tracxn. In the first half of 2022, startups in the crypto and Web3 sectors have already closed 43 agreements totaling more than $1 billion in funding. This is in spite of the current market circumstances. It goes on to explain how the bear market is simply a bump in the road.
The government’s position on digital assets has evolved significantly over the past several years, from an outright prohibition on cryptocurrencies in 2016 to some new cryptocurrency rules released earlier this year.
The proposed law will tax revenue from cryptocurrencies and other digital assets at a rate of 30%, and it also includes a provision for a Tax Deduction at Source (TDS) of 1% for transactions with values greater than ₹50,000.
Additionally, India plans to launch the digital rupee—a CBDC (central bank digital currency)—during the current fiscal year.
India is expecting crypto-specific laws in the near future.
Many concerns remain unanswered, including whether cryptocurrency is legal, if cryptocurrency may still be outlawed, and how digital assets like non-fungible tokens (NFT) fit into India’s legislative system.
While it might take some time to put regulations in place, the recent announcements regarding taxes and the CBDC are the first tangible steps toward recognizing that cryptocurrency might possibly be here to stay.
Perhaps, a framework, similar to the one US recently put out, could be a good place to start with.
Predictions for the Indian Crypto Market:
Centralized Cryptocurrency Exchanges
Centralized Exchanges will see a significant drop in their volumes and an exodus of users. A lot of the users will go dormant and just keep their investments as it is for a long period of time. Centralized exchanges will introduce more long term investment products in the market such as Crypto Baskets which work similar to mutual funds in stocks.
Decentralzied finance is the future and everyone in the ecosystem is looking forward to it. The only issue with DeFi is that is just not mature enough that it attracts the maintrain audience. We will see this space evolve faster than before as well become more compliant and asset-backed in the near future to attract more retail investors from India.
NFT markets are here to stay and evolve in the next cycle of the market. What NFT achieved in the last bull ruin is that they made everyone realize different ways of monetization. NFT market will mature and move towards more utilitarian form of NFTs and keep on attracting invests from India.
As per industry reports India is the largest blockchain gaming market by numbers and the whole play-to-earn gaming community is looking at the indian market to lead the industry in terms of adoption of blockchain games. We will see a lot of users from Indian start playing Blockchain games and make a living out of playing games.
Cryptocurrencies have significant potential to improve financial inclusion for both individuals and businesses in a developing nation like India. Cross-border payments can be enhanced, in particular, by cutting back on transaction costs and processing times. Peer-to-peer lending, international trade, and remittance payments all benefit from this.
India’s underlying fundamentals are strong. India has the talent to create the next wave of crypto and Web3 businesses, with over 4 million developers who are capable of embracing cryptocurrency technology and a young population ready to use them.
It’s safe to say that with all the resources at India’s disposal, the adoption of these digital assets, along with a crypto-friendly framework, will put the country at the forefront of a trillion-dollar industry.
The author is country head- India, Bitay