Should India embrace Cryptocurrencies?

India’s dynamic digital landscape and youthful demographic are driving a powerful wave of cryptocurrency adoption, positioning the country as a key player in this financial revolution. Despite regulatory hurdles, Indian consumers’ demand for financial autonomy through cryptocurrencies is in line with the country’s democratic values. By embracing cryptocurrencies, India isn’t just innovating its financial sector; it’s empowering millions, especially those underserved by traditional banks, with new opportunities and expanding consumer choice in transformative ways.

Globally, decentralized finance (DeFi) is gaining momentum as nations seek alternatives to traditional banking. Nations like El Salvador have adopted Bitcoin as legal tender marking a strong stride towards financial sovereignty. For India with its aspirations to become a global leader embracing crypto currencies offers an opportunity to lead this movement, fostering innovation and economic inclusion. 

India ranks among the top countries globally in crypto adoption. According to latest reports, India was fourth in global cryptocurrency adoption, with uptake notably high among young Indians. This trend makes sense: India has the world’s largest population under 25, who are inclined to favor decentralized finance (DeFi) over traditional banking.  For Indian consumers, crypto currency has become a smart and effective way to safeguard against inflation and currency devaluation. During global inflation of 2022, many Indians opted for bitcoin and stablecoins to preserve their savings, mirroring trends in other countries like Argentina and Turkey, where local currencies were severely depreciated. 

While concerns about money laundering and fraud persist, a well-regulated crypto ecosystem can mitigate risks. Countries like Singapore and the UAE have implemented robust frameworks that encourage innovation while maintaining financial integrity. India could adopt similar models, ensuring consumer protection without stifling growth.

Domestic transactions

India also has approximately 190 million unbanked adults, a group often barred from traditional financial services. Here, cryptocurrency and blockchain technology offer an inclusive alternative. For example, Polygon—a blockchain platform co-founded by an Indian startup—seeks to support decentralized applications for finance, supply chains, and even identity verification. Through such projects, individuals in remote areas can access essential financial services, directly enhancing consumer choice.

Digital solutions have already proven their worth in India, as seen with the significant impact of Unified Payments Interface (UPI) on transactions across the nation. In the same vein, cryptocurrencies provide an effective tool for safe, near-instance transactions with nominal fees, especially for cross border transactions. For a country receiving over $87 billion in annual remittances, crypto offers a chance to significantly cut the fees that families abroad often lose to service charges. Using Bitcoin or stablecoins for remittances could reduce transaction costs and put more money directly in the hands of recipients.

International transactions

India’s reliance on remittances, with over $87 billion flowing in annually, highlights the need for cost-effective solutions. Traditional services often charge up to 7% in fees, significantly reducing the money families receive. In contrast, cryptocurrencies like Bitcoin or stablecoins offer near-instant transfers at minimal cost, putting more money into recipients’ hands. Countries like the Philippines have already embraced crypto remittances, reducing costs for overseas workers and boosting local economies.

Blockchain technology’s potential extends beyond just finance. Initiatives like Binance’s blockchain-based microloans in Africa or Stellar’s remittance solutions in the Philippines demonstrate how decentralized finance can uplift underserved communities. In India, similar innovations could empower rural populations, offering them access to credit, savings, and investment opportunities.

The stability and resilience of cryptocurrencies during crises further showcase their potential. For instance, during the Russia-Ukraine war, Ukrainians used crypto currencies to protect and transfer assets amid banking restrictions. For Indians—especially those working or studying abroad—cryptocurrencies could act as a reliable store of value during economic disruptions, providing a secure financial option.

Despite its potential, cryptocurrency’s volatility and susceptibility to scams remain concerns. Educating consumers about secure trading practices and promoting the use of trusted platforms are crucial. Initiatives like Coinbase’s learning rewards or Binance Academy are already helping users understand crypto’s intricacies. India could adopt similar educational efforts, ensuring that consumers are empowered to make informed decisions.

India’s current tax structure, including the 1% TDS and 30% tax on gains, has pushed millions of users to foreign exchanges, reducing the competitiveness of domestic platforms. Following the TDS introduction in 2022, reports indicated a surge in offshore accounts, with over 450,000 sign-ups on one foreign platform in just one month. This shift not only hampers local companies but also limits consumer choices within the country, pushing policymakers to consider more balanced regulations.

Potential

India’s crypto demographics underscore the demand for modern financial options: 45% of crypto users are from Gen Z, 35% from ages 26-35, and even 8% from the baby boomer generation. This youthful demographic points to an enduring demand for financial solutions suited to the digital age. A balanced regulatory approach would allow India to leverage this demographic advantage and strengthen its position in the future of finance.

Adopting cryptocurrencies could open new avenues for jobs across fields like blockchain development, cybersecurity and fintech. As a global IT juggernaut, India’s tech sector is in an ideal position to capitalize on this growth. By becoming a crypto-hub, India can attract investment, foster innovation and boost the digital economy. 

India’s young population, coupled with rising push for financial inclusion and diverse investment options, presents Indian consumers with every reason to embrace cryptocurrency. This isn’t simply about new investment avenues, it’s about championing consumer choice, forging financial resilience and taking bold steps towards innovation driven future. By adopting a balanced approach to regulation, Indians can empower themselves to engage with the global economy and position themselves as front runners in the digital financial sphere.

By adopting cryptocurrencies with smart and balanced regulation, India can forge a course towards financial innovation and inclusion. Policymakers must embrace the transformative potential of digital assets and create an environment where consumers can thrive. The moment is now for India to lead the global shift toward decentralized finance, unlocking new opportunities for its citizens and the broader economy.

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References 

1. Times of India. (2022, August 12). 7% Indians own crypto, 7th highest globally: UN. https://timesofindia.indiatimes.com/business/cryptocurrency/bitcoin/7-indians-own-crypto-7th-highest-globally-un/articleshow/93509467.cms
2. ET Edge Insights. (n.d.). Rise of decentralized finance (DeFi): A new frontier for fintech in India. https://etedge-insights.com/technology/fintech/rise-of-decentralised-finance-defi-a-new-frontier-for-fintech-in-india/
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4. Yale Insights. (n.d.). El Salvador adopted Bitcoin as an official currency. Salvadorans mostly shrugged. https://insights.som.yale.edu/insights/el-salvador-adopted-bitcoin-as-an-official-currency-salvadorans-mostly-shrugged
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9. Economic Times. (2022, June 9). With $87 billion, India top remittance recipient in 2021: UN report. https://economictimes.indiatimes.com/nri/invest/with-87-billion-india-top-remittance-recipient-in-2021-un-report/articleshow/93012012.cms?from=mdr
10. Vox. (2022, March 4). How crypto is playing a big role in the Russia-Ukraine war. https://www.vox.com/recode/22955381/russia-ukraine-bitcoin-donation-war-crypto
11. Economic Times. (2024, March 3). 90% crypto trading shifted to offshore platforms on TDS: Study. https://economictimes.indiatimes.com/tech/technology/90-crypto-trading-shifted-to-offshore-platforms-on-tds-study/articleshow/105104137.cms?from=mdr
12. Observer Research Foundation. (n.d.). India’s crypto journey: Leading the global adoption race. https://www.orfonline.org/expert-speak/india-s-crypto-journey-leading-the-global-adoption-race