In India, some households own over 25,000 tonnes of gold. Interestingly, investments in cryptocurrency grew from nearly $923 million in April 2020 to reach $6.6 billion in May 2021, according to data acquired from Chainalysis.
The crypto mantra propagated that Bitcoin (BTC) is equivalent to digital gold appears to be winning many converts in the country that has the biggest investors and holders of the precious yellow metal.
These investments are happening despite the massive hostility toward the asset class from the central bank and a proposed cryptocurrency trading ban. One 32-year-old entrepreneur, Richi Sood, is one of the people who shifted from gold to cryptocurrency. Since December 2020, she has put in over 1 million rupees ($13,400) “some of it borrowed from her father “into Bitcoin (BTC), Dogecoin (DOGE), and Ether (ETH).
She appears to have been fortunate with her timing. She cashed out some of her position when Bitcoin surpassed $50,000 in February and invested back in after the recent plunge, enabling her to fund the international expansion of her education startup Study Mate India. Sood said:
“I’d rather put my money in crypto than gold. Crypto is more transparent than gold or property and returns are more in a short period.”
She joins other Indians, estimated to be over 15 million, in buying and selling various cryptocurrencies. That is now catching up with the 23 million traders of the assets based in the United States and largely overshadows the 2.3 million investors in the United Kingdom.
Young Investors Turn To Cryptos
The growth of the number of crypto investors in India is dominated by the 18-35 year age group. The Latest World Gold Council data revealed that Indian adults below the age of 34 have less appetite for gold compared to the old investors. Sandeep Goenka, who co-founded ZebPay and spent several years representing the sector in discussing with the government on regulation stated:
“They find it far easier to invest in crypto than gold because the process is very simple. You go online, you can buy crypto, you don’t have to verify it, unlike gold.”
One of the most notable barriers that prevent widespread adoption is the current regulatory uncertainty that is dominating the Indian space. In the past year, the Supreme Court thwarted a 2018 rule that had banned crypto trading by banking institutions. This reverse of policy resulted in a trading surge within the country.
Nevertheless, regulators and authorities show no signs of adopting cryptos. The country’s central bank says that it has major worries about the asset class and six months ago the Indian government proposed a blanket ban on all digital coins. However, it has been conspicuously silent on the matter ever since. Sood said:
“I am flying blind. I have a risk-taking appetite, so I’m willing to take a risk of a ban.”
It is not the only nation where the regulators are striving relentlessly to limit and the crackdown on the crypto market. The United Kingdom’s financial regulator also banned Binance Markets Ltd recently from engaging in any regulated business throughout Britain.
Regulatory Challenges
The hostility from the regulators means that many bigger investors are reluctant to speak openly about their possessions and investments. One banker who spoke to Bloomberg who invested over $1 million into cryptocurrency markets said that without any definite income tax rules currently, he was worried about the chances of retrospective tax raids in case he became publicly known to be a major cryptocurrency investor.
He already has some plans set in place to shift his trading operations to an offshore Singapore bank account in case a complete crypto ban is introduced. Just to be sure, the value of the Indian digital asset market holdings is still considered small compared to the gold market.
But, the growth is clear, mainly in trading. The top 4 crypto exchanges saw daily trading spikes to reach $102 million from $10.6 million about a year ago, according to CoinGecko. The nation considerably trails China’s $161 billion markets, according to Chainalysis.
Today, the growing adoption is another major sign of the government’s willingness to risk slightly within the consumer finance industry that is dominated by incidents of regulatory shortcomings.
Another 22-year-old independent digital marketer, Keneth Alvares, who has so far invested $1,300 in the crypto market so far stated:
“I think over time everyone is going to adopt it in every country. Right now the whole thing is scary with regulation but it doesn’t worry me because I’m not planning to remove anything for now.”
