Is the future of crypto bright in India’s financial sector?

Crypto finance has been widely adopted by developed economies and has strong backing in the United States and Japan. Vietnam ranks first in cryptocurrency adoption with an index ranking of 1.000, with India not far behind at the 4th rank with an index score of 0.663 - as stated in the Chainalysis 2022 Global Crypto Adoption report. 

The possible future of crypto finance in India is a topic full of promise and pitfalls. The Indian government is steadily approaching developments in crypto finance, and there can’t be a better time for crypto enthusiasts to explore the space. The regulatory framework and investor awareness for cryptocurrencies are evolving everyday, and many see this as a new digital payment mode and investment asset class. 

The Indian cryptotech market has been extremely active, receiving traction gradually but steadily. According to a Nasscom report, with over 15 million retail investors and more than 60% of the states in India emerging as CryptoTech adopters, the market size is expected to cross $241 million by 2030.

In addition, Peer-to-Peer (P2P) platforms have aided in the widespread adoption of cryptocurrency among the tech-savvy generation. P2P platforms like Paxful, for example, enable the exchange of cryptocurrencies between two individuals directly without needing an intermediary.

A strong institutional presence and almost 230 startups in this industry provide many prospects for expansion. The Indian crypto market is estimated to attain 2x faster growth by 2030 with over 8 lakh job opportunities.

Bringing investor awareness

Crypto finance is a niche industry where investors need to be educated on returns, risks, and taxation. The government’s announcement of a 30% tax on profits from digital assets and an additional 1% TDS on transactions above ₹10,000 left crypto investors befuddled and unsure about how to proceed. . 

With this development, Indian investors are looking for ways to evaluate their taxes promptly and consistently. This is where automated crypto taxation platforms come in.Such platforms enable crypto investors to automate taxation by integrating their portfolios and transactions on a unified platform with a consolidated dashboard. These platforms come integrated with various crypto exchanges to automate calculation of tax implications for crypto users. 

Currently, 66% of crypto investors are under 35 (as per a recent report by an Indian crypto exchange), indicating the popularity of crypto among the country's youth. We can rely on increased regulation and education & awareness to reduce skepticism around cryptocurrencies in the near future, to attract millennials and seasoned investors to the community.

Digital currency's role in adoption

The Indian government and the Reserve Bank of India (RBI) are taking a conscious and determined approach to cryptocurrency regulation in the country. The RBI has proposed a centrally regulated digital currency - CBDC (Central Bank Digital Currency), which acts as a legal digital tender. Digital fiat currency can be transacted on the blockchain using wallets, just like other decentralized cryptocurrencies. 

This newly proposed framework has the potential to streamline and regulate cross-border payments. Its main aim is to act like a viable digital payment alternative for retail merchants and wholesalers in India, reduce dependency on cash,  lower transaction costs, and settlement risk.

The future looks bright

RBI has sincerely tapped on the risks associated with virtual currencies, recommending caution before investing in them. At the same time, the government recognizes the potential benefits of the digital rupee to boost digital payments across the country and help save the cost of printing, preserving, and distributing traditional currencies. We anticipate that the government’s gradual and steady move towards the acceptance of digital assets will pave the way for a more evolved and thriving crypto community in India. With technological advancement and the government’s cognizant approach, crypto promises a robust path for the future of finance in India.