Cryptocurrencies, simply called cryptos, have quickly gained traction among millennials and Gen-Z as an asset class. They have attracted investors at a higher rate compared to traditional investment options such as stocks, gold, bank deposits and real estate. The new age investors see this alternative asset class in the form of digital tokens as riskier but better rewarding. However, the prolonged crypto winter that started at the end of 2021 spooked the markets, while some ground has been gained recently.
Just like the rest of the world, cryptocurrencies emerged as a fad in India in 2009 with the introduction of Bitcoin. The first trading transaction took place in 2010, followed by the first cryptocurrency trading platform in 2013. Over the past few years, it has gained a significant following and interest in India. According to industry estimates, around 20 million crypto investors are expected to exist in the country.
Last week, Bitcoin jumped more than 140% this year to outperform other investments such as stocks and gold, and optimism for further gains is high. Its stellar performance came after a turbulent period for the token, which has rebounded on expectations that the Federal Reserve will cut interest rates and hopes of greater demand from exchange-traded funds.
Speaking to LiveMintWinston Hsiao, an active crypto trader who founded Taiwan’s first Bitcoin exchange BTCEx-TW in 2013, said the evolving landscape has shifted between banning crypto, to imposing tax deducted at source and on capital gains.
He emphasized investor protection and preventing illegal activities by requiring Virtual Digital Assets (VDA) providers to register with the Financial Intelligence Unit (FIU) and comply with the Prevention of Money Laundering Act (PMLA).
“Cryptocurrency awareness has been increased in India through the educational efforts of many operators such as XREX’s partner in India, A2ZCrypto, who have put a huge focus on promoting the right understanding and mindset towards blockchain technology,” the co-founder and CRO told us to XREX Inc. .
It is pertinent to note that there is no central body that regulates the use of cryptocurrencies as a form of payment in India. There are also no established guidelines or rules that govern the resolution of disagreements when using cryptocurrencies. Therefore, cryptocurrency trading is done at the investor’s own risk.
The debate surrounding the legality of cryptocurrencies in India has intensified since Finance Minister Nirmala Sitharaman suggested taxing digital assets. According to the Union Budget 2022, the Indian government has announced a 30% tax on cryptocurrency earnings and a 1% tax withheld at source.
“The Indian government has expressed its concerns about the potential for money laundering and illegal activities, lack of central control and regulatory challenges, volatility and investment protection issues,” Hsiao said.
He believes that these problems can be solved by having responsible operators who actively take the step towards building solutions such as escrow services to provide users with peace of mind during transactions, or operators who strive to be regulated by regulators abroad.
The co-founder of XREX claimed that the growing acceptance of cryptocurrencies can impact traditional banking systems in India, as crypto gains acceptance in terms of improved efficiency throughout the financial sector, and there is a possibility of integrating cryptocurrencies into mainstream banking.
Hsiao further mentioned the risks associated with the widespread adoption of cryptocurrency in India. “Regulatory uncertainties are the biggest risk, because it is confusing for the public, leading to market instability and information asymmetry. Also, the potential for fraud and scams without clear regulations is another risk,” said the crypto expert.
However, he exuded confidence that the continued innovation and growth in the Indian blockchain ecosystem, especially quality startups, and protocols can take the global stage. “Integration of cryptocurrencies into mainstream financial systems, with room for traditional and blockchain finance to play important roles in the ecosystem,” he added.
Disclaimer: The opinions and recommendations made above are those of individual analysts or trading companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 08 Dec 2023, 14:19 IST