Though cryptocurrency has only this year picked up mainstream coverage, Bitcoin has been around since 2009. Like many countries, due to either lack of knowledge or lack of trust, India, too, had shunned it.
India’s current growth trajectory would put it as world’s fourth-largest economy. It is noteworthy to mention this is despite demonetization that went into effect in November 2016. This move effectively wiped out 86% of the country’s currency out of circulation. While economist would credit India’s growth to low inflation and interest rates, which has attributed to helping the country during its slow spend period, I would also credit this growth to the current government’s continued efforts to increase its market reform. According to Global Economic Prospects, in 2017, India’s economy is expected to grow 7.2%, which is higher than the previous years’ average of 6.12%. Therefore, government’s ongoing marketing reform efforts have shaped it for improved business competitiveness, ranking India to 39th position out of 138 countries.
No doubt, there has been a growing consensus whether cryptocurrencies could play a vital part to operate country’s digital currency. While India may seem late entrant to the cryptocurrency adoption, it joining the bandwagon would compliment Prime Minister Narendra Modi’s demonetization efforts – to curtail money laundering & counterfeit currency.
Reserve Bank of India has been researching Blockchain technology for some time now. Even the Ministry of Finance had been established an intergovernmental committee to examine the framework of cryptocurrencies and asked for a proposal for a regulatory framework for the digital currencies. After months of committee continued research, it recently submitted its initial report to Indian Finance Minister Arun Jaitley. It proposed for India’s own cryptocurrency, as an alternative to the Indian rupee.
Furthermore, Sudarshan Sen, Reserve Bank’s executive chairman, has stated that “right now, we have a group of people who are looking at fiat cryptocurrencies. Something that is an alternative to the Indian rupee, so to speak. We are looking at that closely.” Thereby alluding to the possibility of India launching its own currency instead.
I am confident as India’s digital currency is fully adopted by its constituency, it will further enable the country to have “less cash transactions and an increase in digital currency” – something the current administration has set the precedence with demonetization.
Indian Bitcoin companies have noticed a surge of customers, especially after the demonetization. Some numbers suggest there are over 600,000 Bitcoin users in the country. Some exchanges state there are as many as 2500 new users added a day. This is still a very small % of the population of billions. However, this sharp increase is highlighting the growing customer base due to it’s rising confidence.
As Bitcoin becomes mainstream, it will continue to strengthen not only India’s infrastructure but also provide easier access to the financial solutions for its unbanked population.
Despite the initial distrust of non-fiat cryptocurrencies, banks across the globe have taken a considerable interest in the space lately. Countries like Japan already recognize Bitcoin as a legal form of payment, treated as an asset. People’s Bank of China is looking to be the first major bank to issue digital money. The Dutch central bank has created its own digital currency for circulation. European Central Bank has launched research projects to understand use cases of Blockchain. Singapore’s Prime Minister, Lee Hsien Loong, has made a push to be a cashless society. With so many countries embracing the cryptocurrencies, even the former chairman of US Federal Reserve Bank, Ben Bernanke, is now a champion of digital currencies.
Given the explosion of interest, cryptocurrencies are rapidly winning the trust badge across the global banking entities. On the same note, enthusiasts view the currency not only as safe & decentralized but the one that takes away the power of governments to print unlimited money.
As the largest democracy in the world, India could very well create a great example for the greatest financial evolution of our time.