Bitcoin and other cryptocurrencies have been growing rapidly in India despite restrictions from the Centre and the Reserve Bank of India. According to some estimates, over 10 crore Indians own cryptocurrencies, making India the country with the largest number of Bitcoin holders in the world. Recently Bitcoin hit $60,000 for the first time in six months, nearing its record high. What does the future hold for Bitcoins in India?
Bitcoin, the most popular private cryptocurrency in the world, has been rallying this year, hitting an all-time high of over $66,000 last week. Many investors have been piling into bitcoin and they expect the bull run to continue. According to some estimates, over 10 crore Indians own cryptocurrencies, making India the country with the largest number of bitcoin holders in the world. India has recently also witnessed a number of bitcoin brokerages opening their doors to serve customers.
Why is bitcoin gaining traction in India?
Bitcoin and other cryptocurrencies have been growing rapidly in India despite the pessimism of the Centre and the Reserve Bank of India (RBI). In 2018, the RBI had banned banks and other regulated financial entities from dealing with clients who handled private cryptocurrencies such as bitcoin. However, the Supreme Court last year overturned the RBI’s order. This has cleared some of the uncertainty around the legal status of cryptocurrencies and contributed to the rapid rise in their trading volumes. Notably, trading volumes in popular cryptoexchange platforms such as WazirX grew multi-fold last year within weeks of the Supreme Court’s decision.
CoinSwitch Kuber, CoinDCX, Zebpay and BuyUCoin are some of the other more popular platforms that have come up to facilitate retail trading in cryptocurrencies. CoinSwitch Kuber and CoinDCX have in fact managed to achieve unicorn status with their valuations crossing the $1-billion milestone recently. These companies have bet on India despite looming regulatory uncertainties as they see huge potential for growth in a market with a predominantly young population. Blockchain, the technology that underlies many cryptocurrencies, has also found favour among celebrities such as Amitabh Bachchan and Salman Khan. These stars plan to launch NFTs (non-fungible tokens) to sell memorabilia that will carry their exclusive digital signatures validated using blockchain technology.
Will the rally in bitcoin last?
It depends. Bitcoin witnessed a similar rally in 2017, when its price increased by almost 20 times. This time around, the price has increased about six-fold in the last one year. At the moment, it is trying to decisively break above the highs that it scaled in April but it seems to be facing some resistance from sellers. Whether bitcoin will rise to further highs or crash to new lows is anyone’s guess. Its price over the long-run, however, will depend on its fundamental value as a currency.
Bitcoin enthusiasts see the rise in the price as a validation of their belief that private cryptocurrencies are a viable alternative to fiat currencies such as the dollar and the rupee. Hence they see further upside to the price of bitcoin. Their core argument is that unlike fiat currencies which are indiscriminately printed by central banks, the limited supply of private cryptocurrencies makes them a lot more valuable. In fact, the supply of many private cryptocurrencies is limited by design and this is an attribute that has attracted many to invest in them. Many even expect private cryptocurrencies to replace fiat currencies at some point in the future.
Bitcoin sceptics, however, argue that scarcity alone is not a sufficient condition for an asset to be widely accepted as money. They point out that the acceptance of bitcoin as a currency to purchase goods and services in the real world is still extremely low. One of the reasons for this may be the high degree of volatility seen in the price of bitcoin and other private cryptocurrencies. As Eswar Prasad, an economist at Cornell University, quipped, “It is as though your $10 bill could buy you a beer on one day and a bottle of fine wine on another.” Many people may not be willing to accept a currency whose value might drop sharply in the near future; in fact, some cryptocurrencies known as ‘stablecoins’ have come up to address this very problem. Hence the sceptics of private cryptocurrencies see the meteoric rise in the price of bitcoin as driven by speculative mania rather than by the fundamental value.
Other sceptics have argued that sovereign guarantee by the state is essential for any asset to be widely accepted as currency. It should, however, be noted that in the past commodities such as gold and silver gained acceptance as money even before any government declared them as official currencies.
What lies ahead for private cryptocurrencies?
The biggest threat to private cryptocurrencies going forward will come from governments. At the moment, governments possess an absolute monopoly over the issuance of money within their territories. This allows them to enjoy various special privileges that they would not otherwise. For instance, with the help of the central bank, they manage to fund their increasing budget deficits. Central banks also use their control over the nation’s money supply to manage aggregate demand in the economy. All such privileges that governments currently enjoy along with their central banks, however, would cease to exist in a world where private currencies actively compete against fiat currencies issued by the state. In such a world, people can readily switch to other competing currencies if they believe that their wealth held in a certain currency issued by a central bank is losing value rapidly. As more people refuse to accept currencies issued by the central banks, this will limit the spending powers of governments and their central banks. So it is highly unlikely that governments will allow private cryptocurrencies to flourish as alternative money. While national currencies at the moment do compete against each other, such competition is limited to a great extent by geographical and other barriers.
It should be noted that the Supreme Court had overturned the 2018 RBI order saying that under existing laws the RBI does not have the powers required to restrict individuals dealing in cryptocurrencies. However, this does not put an end to the primary uncertainty over the legal status of private cryptocurrencies. The Centre may well pass a new law that either completely bans or heavily restricts private currencies. China has already deemed all private cryptocurrencies as illegal and banned them. It soon plans to issue a Central Bank Digital Currency that is based on the same blockchain technology on which private cryptocurrencies work. More governments may adopt the same approach in the coming years.
Latest Cinema
Top News
More Stories
French Open: Thiem out in first round, record 10th consecutive loss
22 May, 2022, 11:59 pm
‘KGF2’ director Prasanth Neil has shared a photo poster of his films
22 May, 2022, 11:49 pm
Birthday girl Suhana Khan with love for Archies co-star Khushi Kapoor
22 May, 2022, 11:45 pm
Pep Guardiola’s Manchester City beat Aston Villa 3-2 to win the Premier League
22 May, 2022, 11:26 pm
IPL 2022 breaks 1000 sixes, sets new record, PBKS beat SRH by 5 wickets
22 May, 2022, 11:06 pm
My Umran got the support of the whole country: Father got emotional on son’s success
22 May, 2022, 10:21 pm
I have to keep doing something right: Deepika Padukone on a trip to Cannes
22 May, 2022, 10:13 pm
If you believe…: What DK said after being selected in the Indian squad for South Africa
22 May, 2022, 10:01 pm
“Cannes Is Great But…”: This Is Pooja Hegde’s Greatest Source Of Happiness
22 May, 2022, 9:29 pm
State teams set up tents in Davos for the World Economic Forum
22 May, 2022, 8:54 pm
Cannes 2022: Hina Khan releases poster for her second film ‘Country of the Blind’
22 May, 2022, 8:52 pm
Happy Birthday Suhana Khan! BFF Ananya Pandey, Shanaya drop UNSEEN pictures
22 May, 2022, 8:40 pm
Center looking to spend over ₹2 lakh crore to fight inflation, say sources
22 May, 2022, 8:32 pm
If Karthik was chosen, why was Dhawan ignored? Raina raised question
22 May, 2022, 8:16 pm
Fans slam BCCI selectors for choosing V Iyer over Rahul Tripathi, Samson
22 May, 2022, 7:25 pm
Aishwarya Rai Gets Loved Warmth From A Fan At Cannes 2022: Watch Viral Video
22 May, 2022, 7:14 pm
Why was Umran Malik selected in Team India, the fastest bowler of IPL 2022?
22 May, 2022, 6:46 pm
Indian squad for SA T20Is: Dinesh Karthik’s comeback puts pressure on Pant
22 May, 2022, 6:36 pm
‘Imposed on us…’: Afghan female news anchors forced to cover faces on air
22 May, 2022, 6:27 pm
Cheteshwar Pujara returns to Indian Test squad for England Test
22 May, 2022, 6:06 pm
Cannes 2022: Urvashi Rautela flaunts her fashion quotient in a hot pink pantsuit
22 May, 2022, 6:03 pm
India vs South Africa: BCCI announces squad for T20I series, Umran Malik
22 May, 2022, 5:45 pm
Salil Parekh reappointed as CEO and MD of Infosys for the next five years
22 May, 2022, 5:38 pm
Top Gun – Maverick review: Tom Cruise is consistently on the ball as Pete Mitchell
22 May, 2022, 5:20 pm
Jagjag Jio Trailer: Varun Dhawan and Kiara Advani’s family drama is full of surprises
22 May, 2022, 4:42 pm
Center is bearing full burden of reduction in petro tax: Nirmala Sitharaman
22 May, 2022, 4:35 pm
Is Pant lying? Fan says DC captain unfairly blames teammates on DRS disaster
22 May, 2022, 4:33 pm
Kyiv rules out ceasefire as Russia steps up offensive in Ukraine’s east
22 May, 2022, 4:32 pm
Liverpool vs Wolves PL Match Live Streaming: When and where to watch LIV vs WOL?
22 May, 2022, 4:14 pm
Cannes 2022: Ash-Abi found at the airport, the family returning from the French Riviera
22 May, 2022, 4:04 pm
Man City vs Aston Villa PL match live streaming: When and where to watch?
22 May, 2022, 3:52 pm
Suhana Khan’s birthday celebration includes balloons and chocolate cake
22 May, 2022, 3:43 pm
Travel to these 10 exotic international destinations this summer!
22 May, 2022, 3:25 pm
Gama Pehalwan’s 124th Birthday: All You Wanted to Know About The Great Gama
22 May, 2022, 2:55 pm
Quad Summit 2022: PM Modi to be among first global leaders to meet new Aus PM
22 May, 2022, 2:55 pm
Monkeypox is a matter of concern: US President Joe Biden
22 May, 2022, 2:19 pm
Will RCB’s Harshal play IPL Eliminator vs LSG? The pacer hints at injury return
22 May, 2022, 2:02 pm