By Mayurakhsi Das
To understand why cryptocurrency has not strengthened its presence in India, we must first understand exactly what it is. Cryptocurrency, commonly referred to as “crypto”, is a digital payment system that does not rely on banks to authorize transactions. In short, it is a peer-to-peer system that allows anyone to send and receive payments. Rather than being physical money carried around and exchanged in the real world, cryptocurrency payments exist solely as digital records in an online database that describe and verify specific transactions.
Crypto has been viewed, debated, ignored and praised from various angles. An interesting angle to see and understand the crypto failure in India is from a cultural point of view. India is a nation deeply rooted in its cultural conditions, values and ethics, all of which preach and praise stability, restraint and balance. Large-scale adoption of something as volatile as cryptocurrency does not sit well with our teachings and core values.
Similar to our thinking, most of our investment plans are traditional; a good mix of debt and equity, with little or no room for risky investments. Even today, a larger section of Indians prefer to invest their money in assets like gold, government bonds and real estate. Investment tools such as mutual funds and direct stocks have only recently found their footing here, it is safe to assume that mass adoption of cryptocurrency will not be the case in India in the foreseeable future.
Apart from the cultural reasons for its failure, there are various reasons ranging from economic and national security that worry the government, and rightly so. The Reserve Bank of India has observed and maintained that there is a high risk of money laundering, hacking, terrorist financing and financial fraud in this decentralized area. This terrifying prospect, along with 30% tax and another 1% tax deducted at source, is perhaps the biggest reason why only 7.3% of Indians own or deal with crypto.
Countless countries around the world are running experiments using this decentralized payment process, gathering empirical evidence and learning about the limitations and drawbacks of such a system. Perhaps when the world has access to the knowledge needed to implement or widely understand crypto, the topic can be revisited and the technology can be tailored to fit the needs of people and governing bodies.
With many official discussions currently underway, a blanket ban on cryptocurrencies is a highly likely possibility in the near future.
But the government and the RBI see huge potential in digital currency and have already started developing the framework for an official digital currency for the country. Digital payment methods align with our Prime Minister’s plan to transform India into a digitally empowered society and knowledge economy. With apps like “MyGov” and “Digilocker” enabling our people to go paperless, our digital revolution has already begun. An official and regulated digital currency is simply the next step towards a hassle-free, fast and digitally optimized economy. Although it remains a fact that it is likely to take at least a few cycles, if ever, before we see Indians eagerly investing in cryptocurrency for Dussehra or Dhanteras.
(The author is the founder and CEO of Elixir AI)