1.45 billion.
That is the number of citizens living in the most populous country on the planet, India, which has the fifth-largest economy in the world with a projected 7% growth rate in 2024.
With numbers like that, India’s integration of crypto stands to have a significant influence on global cryptocurrency adoption. According to Statista, India’s cryptocurrency market will reach US $6.6bn in 2024.
This article explores India’s journey with cryptocurrency and blockchain technology, from its global economic context to the challenges and opportunities ahead.
India’s Global Economic and Population Context
As the world’s fifth-largest economy, India has a youthful population eager to embrace new technologies. Over 50% of its population is under 25, fueling innovation and the adoption of crypto assets. This demographic is particularly visible in urban centers, where digital payments are rapidly gaining popularity.
The Rise of Fintech and Digital Payments
While cryptocurrencies are not recognized as legal tender in India, India’s fintech revolution, highlighted by the success of the Unified Payments Interface (UPI), has set the stage for greater crypto adoption. Launched in 2016, UPI has become a cornerstone of India’s digital economy, paving the way for the acceptance of digital currencies.
However, this rise in digital payments has also brought challenges, particularly regarding regulation and consumer protection. The government’s cautious approach towards cryptocurrency reflects its desire to balance innovation with the need for regulatory oversight, especially in mitigating risks such as money laundering and fraud.
Timeline of India’s Actions on Cryptocurrency
Early Stages (Pre-2018)
Cryptocurrencies gained traction in India during the early 2010s, with early adopters trading and mining in a largely unregulated environment. In 2013, the Reserve Bank of India (RBI) issued its first warning about cryptocurrency risks. Despite these warnings, the market grew, leading to the emergence of Indian cryptocurrency exchanges by 2017.
Regulatory Cryptocurrency Regulation Crackdown and Legal Battles (2018-2020)
India’s regulatory landscape is evolving. In 2018, the RBI effectively banned banks from providing services related to cryptocurrencies, causing trading volumes to plummet. The ban led to a legal battle culminating in a 2020 Supreme Court ruling overturning the ban. This ruling reignited the crypto market in India, although regulatory uncertainty persisted.
Recent Developments (2021-Present)
In 2022, the Indian government introduced a 30% tax on income from digital assets, signaling a shift towards regulation rather than an outright ban. The budget also included a 1% tax deducted at source (TDS) on crypto transactions, formalizing the industry.
These taxes inevitably sparked mixed reactions, with some viewing it as legitimization and others criticizing the high tax rate.
Meanwhile, the Securities and Exchange Board of India (SEBI) proposed stricter regulations, focusing on investor protection and market stability.
The RBI continued to express reservations about private cryptocurrencies, advocating for a Central Bank Digital Currency (CBDC) as a safer alternative. The digital rupee, introduced in late 2022, represents a significant step in India’s crypto journey, aiming to offer the benefits of digital payments while maintaining stability.
India’s Integration of Cryptocurrency
Adoption Trends and Market Growth
Despite regulatory uncertainties, India’s crypto market has seen remarkable growth. By 2023, it became one of the world’s largest cryptocurrency markets, driven by young investors and the rise of crypto-based remittances. However, high tax rates have dampened enthusiasm among some investors.
Even so, India’s crypto userbase growth is expected to dwarf that of the US and Europe combined, as this chart from 2022 shows.
Covid, Vitalik and DogeCoin, and Vitalik’s $1B Donation
In 2021, Ethereum co-founder Vitalik Buterin made headlines by donating crypto tokens worth $1B (at the time) to an India Coronavirus relief fund. The donation included vast amounts of dog-themed meme tokens, including the Shiba Inu coin (SHIB), Dogelon (ELON), and Akita Inu (AKITA).
While they did not realize the total value of the coins then, the donation effectively seeded India’s evolving crypto market with meme coin brands that remain popular today.
Government and Regulatory Stance
The Indian government is cautious about crypto regulations, balancing innovation with financial stability and security concerns. While introducing crypto taxes indicates a preference for regulation, the high tax rates have raised questions about the government’s long-term vision.
SEBI has proposed measures to enhance transparency and reduce risks, while the RBI remains skeptical, promoting the digital rupee as a state-backed alternative.
India’s CBDC Initiative Compared to China and the USA
China is the current clear frontrunner in Central Bank Digital Currency (CBDC) development, having launched extensive trials of its Digital Yuan across several cities, integrating it into various payment systems, and even testing cross-border transactions.
India’s CBDC progress is more cautious but significant; the Reserve Bank of India has initiated a pilot for its Digital Rupee, focusing on wholesale and retail applications, with plans to expand testing across more regions. The digital rupee, India’s CBDC, is a pivotal milestone.
Unlike decentralized cryptocurrencies, the RBI issues and regulates the digital rupee, offering a government-backed alternative. Its introduction has sparked debate, with some viewing it as a complement to private cryptocurrencies and others seeing it as a potential competitor.
In contrast, the USA remains in the exploratory phase, with the Federal Reserve conducting research and consultations on a potential Digital Dollar. Still, no formal pilot or implementation has been announced.
While China leads with an aggressive rollout, India is advancing steadily with targeted pilots, and the USA is taking a measured approach, carefully weighing the implications of introducing a CBDC into its financial system.
The Future of Cryptocurrency in India
India’s stance on cryptocurrency will significantly impact the global digital economy. The development of the digital rupee and the creation of a clear regulatory framework will be key areas to watch. As India continues to explore the potential of cryptocurrency, its approach will shape the industry’s future, both locally and globally.
India’s crypto adoption is growing fast. On-chain value received by Indians reached $270 billion in 2024, up 60% year-on-year. Here are some other interesting points:
- Even as adoption increases, India represents only 4% of the world’s Crypto investor population
- Statista predicts the Indian cryptocurrency market to witness significant revenue growth, reaching US $6.6bn by 2024. They expect this growth to continue with an annual growth rate (CAGR 2024-2025) of -2.44%, resulting in a projected total revenue of US$6.4bn by 2025.
- Over 15-20 million Indians have cryptocurrency investments, with the total value exceeding $10 billion.
- Bitcoin is the dominant asset in India with 17-18%, followed by Ethereum at 10-14%. Meme Coins like Doge and Shiba Inu collectively comprise 15-18% of the investments.
Moving Ahead with India’s Integration of Crypto
India’s relationship with cryptocurrency is evolving, reflecting its broader journey as a global power. By embracing a balanced approach that fosters innovation while protecting consumers, India can integrate cryptocurrency into its economy to benefit all stakeholders.
What do you think? Will India move ahead with rapid crypto adoption in the coming years?
If you trade crypto assets, ZenLedger can help you stay organized for tax time. Our platform automatically aggregates transactions across your wallets and exchanges, computes your capital gain or loss, and generates the paperwork you need to file. This paperwork includes personal tokens you issue or purchase and the income or loss they generate.
The above is for general info purposes only and should not be interpreted as professional advice. Please seek independent legal, financial, tax, or other advice specific to your particular situation.
