India’s Crypto Investments Grew Over $39B in a Year – Despite Regulatory Hostility
India’s traders have been unfazed by consistent fears of harsh crypto regulations. Rather than shunning away from these assets, its citizens have invested what now totals around $40 billion into the industry in the space of just one year. This figure is up from $200 million, making for a 19,900% growth rate.
Are Lawmakers Out of Touch with the Public?
The main takeaway from this news is that India’s regulators, who have shown disdain for the crypto industry, appear to be at odds with the desires of its people. India has had a history of being aggressive towards crypto– in 2018, the Reserve Bank of India (RBI) passed a law calling to ban crypto transactions. However, in 2020, India’s Supreme Court overturned this law and put a stop to exchanges being de-platformed in the country.
The Supreme Court’s overturning has shown to have an immensely positive effect on the industry, as it was shortly after this moment that investments grew exponentially. Unfortunately, Indian investors are not fully in the clear just yet, as earlier this year the country’s Ministry of Corporate Affairs (MCA) began drafting a new bill that would criminalize digital currency.
If passed, the bill would forbid trading, holding, issuing, disposing of, and spending cryptocurrency. It would also place a ban on mining, a contentious topic at the moment, as China has just recently intensified its crackdown. Most worrying is that this bill threatens to also penalize offenders with up to ten years imprisonment.
Yet despite these fears, India has not slowed down on its investments. Considering the severity of the punishment at hand (if the bill passes), India’s massive crypto growth shows just how desirable the public views this tech. It could also be a sign that the citizens have faith that the Supreme Court will strike down this law as well, should it ever come into force.
Bloomberg noted that people in India favor crypto because of its ease, transparency, and speed at which you can see returns. In their report, Sandeep Goenka, the co-founder of ZebPay, a Mumbai-based crypto exchange explained that people “find it far easier to invest in crypto than gold because…you don’t have to verify it, unlike gold”.
It has also transpired that the biggest investors are in the 18-35 age range, capturing most millennials and early Gen Z’s. This fits with the recent findings that millennials greatly favor crypto investments over any other asset class.
Why is India’s Government Unfriendly to Crypto?
With the possibility of such draconian laws coming out which both ban and criminalize crypto activity, it begs the question of why India is taking such a cold stance. The answer lies in an infamous piece of legislation: “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021”.
In official documentation, the purpose of this bill been described as to:
“create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The Bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of crytptocurrency and its uses.”
Regardless of whether this bill passes or otherwise, it clearly shows the Indian government’s intentions. There are two important points worth exploring. Firstly, the bill is designed to lay the groundwork for an official digital currency, run by the RBI.
Like China, India is also planning to build its own digital alternative to fiat. The country could be nervous that a digital asset like Bitcoin would be a direct competitor to it, meaning it would be in the government’s (supposed) best interest to limit their exposure to such assets.
Secondly, India’s government believes that other cryptocurrencies are private. This view seems disconnected from the reality of how most cryptocurrencies run, as their decentralization and permissionless nature make them anything but private. On the contrary, you could argue that they are aggressively public, as no one centralized body can stop another person from engaging with these blockchains.
Nevertheless, these appear to be the reasons for India’s hostility towards the industry. Of course, this disdain has done nothing to stop the people from trading. If anything, bringing a ban in the first place, and considering another, may have triggered the Streisand Effect, where the attempted prohibiting, concealing, or limiting of something causes more people to flock to the thing in question.
Do you think India will ever successfully ban cryptocurrency? Let us know in the comments below.