Cryptocurrencies, or cryptos, have quickly acquired acceptance as an asset class among millennials and Gen-Z. They have attracted more investors than traditional investment options such as equities, gold, bank accounts, and real estate. This alternative asset class in the form of digital tokens is viewed as riskier but more profitable by new age investors. However, the extended crypto winter that began at the end of 2021 frightened the markets, despite recent gains.
With the advent of Bitcoin in 2009, cryptocurrencies, like the rest of the world, became a fad in India. The first business transaction occurred in 2010, and the first cryptocurrency trading platform appeared in 2013. It has gained a large following and attention in India during the last few years. According to industry projections, the country will have over 20 million bitcoin investors.
Bitcoin has risen more than 140% this year, outperforming conventional investments such as stocks and gold, and expectations for additional gains are high. Its outstanding success came after a difficult period for the token, which has recovered on forecasts of interest rate cuts from the Federal Reserve and increased demand from exchange-traded funds.
Winston Hsiao, an active crypto trader who created Taiwan's first Bitcoin exchange BTCEx-TW in 2013, said the shifting landscape switched from banning crypto to charging tax on capital gains and deducted at source. By forcing Virtual Digital Assets (VDA) providers to register with the Financial Intelligence Unit (FIU) and comply with the Prevention of Money Laundering Act (PMLA), he emphasized investor protection and the prevention of criminal activities.
"Awareness about cryptocurrency has been increased in India through educational efforts by many operators like XREX's partner in India, A2ZCrypto, who placed a huge focus on promoting the correct understanding and mindset towards blockchain technology," the co-founder and chief operating officer of XREX Inc.
It is worth noting that there is no central organization in India that regulates the usage of cryptocurrencies as a form of payment. Furthermore, there are no set principles or rules guiding dispute resolution while using cryptocurrency. As a result, cryptocurrency trading is done at the risk of the investor.
The debate in India over the legality of cryptocurrencies has heated up since Finance Minister Nirmala Sitharaman proposed taxing digital assets. The Indian government announced a 30% tax on cryptocurrency earnings and a 1% tax withheld at source in the Union Budget 2022.
"The Indian government has expressed its concerns about the potential for money laundering and illicit activities, lack of central control and regulatory challenges, volatility and investor protection issues," Hsiao said in a statement.
He feels that these difficulties can be resolved by having responsible operators who actively work to establish solutions such as escrow services to provide users peace of mind when transacting, or operators that go above and above to be regulated by regulators in other countries.
According to the XREX cofounder, the growing acceptability of cryptocurrencies may have an impact on existing banking systems in India, as crypto gains recognition in terms of better efficiency across the finance industry, and there is a chance of incorporating cryptocurrencies into mainstream banking.
Hsiao went on to discuss the risks of broad bitcoin adoption in India. "Regulatory uncertainties pose the greatest risk because they are perplexing to the general public, leading to market instability and information asymmetry." Another issue is the possibility for fraud and frauds in the absence of clear laws, according to the crypto expert.
However, he expressed confidence that the Indian blockchain ecosystem, particularly excellent startups and protocols, will continue to innovate and expand. "Integration of cryptocurrencies into mainstream financial systems, with room for both traditional and blockchain finance to play important roles in the ecosystem," he went on to say.
