As the India’s economy goes digital, so does the public speculation of the new paradigm shift in the system. Recently, El Salvador voted in favour of having bitcoins as a legal tender.
El Salvador becomes the first country to adopt BTC as legal tender. The law was passed with overwhelming majority in the Salvadoran congress with 62/84 votes in favour. "Volcano energy to be used for mining" says @nayibbukele @EESAenIndia#Crypto #ElSalvador #Cryptocurrency pic.twitter.com/5miP7UWeRa
— FinCrack (@FinCrack_) June 9, 2021
Investors too are showing interest in cryptocurrencies, owing particularly to the lack of paperwork required to conduct transactions, the ease and above all the decentralised nature of the asset class. However, the growth of such cryptocurrencies have always been bottleneced by central banks and other regulatory authorities. So, lets look into answering a question on which India’s financial position in the world would be determined. Will India adopt bitcoins as a legal tender in 2021?
Background
One of the primary reasons why crypto has not seen mass adoption is not because of the technical difficulties or the infrastructural inadequacies associated with the same, legal, economic, and financial difficulties are the reason why cryptos are not in mass use today.
However, India’s central bank, Reserve Bank of India recently launched an initative through blockchain based innovation workshops to collaborate with researchers, bankers, and FinTech industrialists in order to study how blockchain tech might be used in the furtherence of India’s economic policies. Digital currencies such as Ripple, Litecoin, Bitcoins, Ethereum, Dogecoins, etc are cited by the RBI as challenging applications but promising ones nonetheless.
The Policies
The same conclusion also hints at a more negative aspect of the situation, claiming that mass adoption of crypto is an inherently dangerous proposition as there does not exist a centralised authority and/or rule to control the use of abuse of said cryptos.
If one focuses on the politico-regulatory aspect of the situation, in 2017 about 4-5 Lakh individuals were sent notices by Income Tax department to pay capital gains tax on Bitcoins. The only thing to be done as far as regulation of crypto trade is to see it as a product and then let market forces determine to valye. Thus, KYC will happen and push the crypto economy underground as far as one can see.
Crypto would then be invested in and taxed, in the same manner as income. More recently, in the early weeks of March 2021 in an effort to improve regulation and improve ease of business, union government mandated that businesses must publicly report all their crypto investments.
A Bright Future
Crypto and blockchain will be something to keep one’s eyes on owing to the recently passed Digital Currency Bill in India. In all the government responses in the Parliament regarding the passing of the bill, it is clear that the government is not at all against crypto in its totality.
Despite the plethora of reports indicating that India would ban crypto altogether, there are a lot of applications that is being appreciated and understood by the lawmakers. India’s economy being projected at 5 Trillion dollars, India cannot ignore the multi-billion dollar business opportunity that crypto brings on the table.
Moreover, a forward looking crypto strategy will have huge impact on the development of our overall financial infrastructure, shielding the nation from illicit financial activity, preventing and detecting financial crime, boosting monetary stability, growing options in the market, attracticing foreign investment and reatining the global leadership in FinTech brought on about by the UPI technology.
India has to anticipate the future and work on putting in place appropriate safeguards to maintain our global liquidity situation to become ‘Atmanirbhar’ and get rid of our dependency in black swan events such as 2008 and 2020. Cyberwarfare often presents a significant danger in our technologically integrated world. A decentralised financial infrastructure can and will help overcome these problems and is less vulnerable in periods of instability due to its distributed nature.
The Road Ahead
The world right now is going through rapid transformation and India is the forerunner in this road of digital drive. Crypto, the way many see is not just another technogical advancement, its akin to the formation of a new system through a tantalising new philosophy of taking control of your own finances through decentralised financial applications. Crypto as a store of value or as a currency is simply the new stage in the evolution of our financial systems. With that being said, where our government ends up with its policy for this new financial infrastructure, remains to be seen.